Concerned about the fallout from rising mortgage delinquency rates and foreclosures around the country, the federal government recently stepped into the fray, issuing new tighter guidelines aimed at dealing with so-called “exotic” adjustable-rate mortgages. Worried about the lingering effect of a growing pool of borrowers unable to meet their rising mortgage payments, regulators at the Office of the Comptroller of the Currency want banks to make sure the loans they are making are "consistent with prudent lending practices, including consideration of a borrower's repayment capacity."

The new Federal guidelines contain disclosure and underwriting provisions that could mean fewer buyers will qualify for such nontraditional loans. These loans are what many in the banking and real estate industries say have helped home buyers get into their first home or purchase more home than they otherwise could afford using more conventional mortgage products.

The National Association of Realtors (NAR) lauded the new consumer education efforts put forth by the government, but cautioned regulators not to restrict innovation in the mortgage lending sector. Striking a balance between consumer education and the free marketplace is of utmost importance, according to the Realtors.

Bankers are critical of the new guidelines, saying they are too restrictive, especially federally insured lenders. But will these new disclosure and underwriting requirements affect investors, realtors and RealtyTrac customers? Will the clamp down on underwriting possibly shrink the number of foreclosures? And at this point in the market are shrinking foreclosures good or bad for investors?

Keep watching ForeclosurePulse and RealtyTrac for more information. We welcome your comments and thoughts and encourage you to offer us feedback and suggestions. Post your comments on the blog, or send us an e-mail to editor@foreclosurepulse.com.