Federal regulators to give mortgage lenders bigger legal shield

December 18, 2012 09:30AM

Despite the numerous abuses and discriminatory practices that U.S. banks have been accused of since the recession began, federal regulators are about to give big banks protection against homeowner lawsuits, the New York Times reported.

The Consumer Financial Protection Bureau will soon complete new mortgage rules that are intended to help the housing market continue to grow. By shielding banks from lawsuits, they hope to give banks an incentive to build higher-quality home loans.

Banks are attempting to avoid lawsuits like the $26 billion settlement reached earlier this year, by increasing the availability of legally protected qualified mortgages, which make it extremely difficult for borrowers to sue their lenders in foreclosure cases.

But some feel that homeowners are being stripped of an important protection. “A lot of this, quite frankly, is litigation paranoia,” Michael D. Calhoun, president of the Center for Responsible Lending, said. “If you ask any of the lawyers in the financial industry, they’ll acknowledge there won’t be class actions.” [NYT]Christopher Cameron