Readers suggested a topic on the new federal lending guidelines. "Will these 'rules' have any teeth?"

"Bank regulators agree on subprime rules: Bank regulators have agreed on new standards for subprime mortgage loans and are prepared to release it Friday, several sources familiar with the matter said Thursday. That provision is tougher than many lenders had hoped, as qualifying borrowers at the 'fully indexed rate' could put a crimp in standards that evolved during the housing boom."

"New subprime mortgage rules from regulators. Federal financial regulators issued new rules Friday for subprime mortgage lending to address adjustable-rate mortgage products that can cause payment shock."

One had these questions. "What exactly does that mean? If they have to qualify at the start of the loan for the monthly payment at the end of the loan, then doesn’t that provide an incentive to make the loan on a 'steady state' payment schedule? Because the fixed rate fully amortizing loan will provide the lowest 'highest payment'….won’t it?"

A reply, "When I worked at US Bank in commercial lending, our underwriters would qualify borrowers based on an 8.25% rate. The cash flow of the property would have to exceed 1.2 based on the 8.25% index rate. This was back in 2003/04. We had 5 year fixed programs at 5-5.5% at the time."

"It would piss all of us sales people off but they did it for a reason...risk mitigation. And none of our commercial loan programs were no or low doc. So every borrower had to qualify for the loan as well. Needless to say US Banks portfolio of commercial loans has a very, very low default rate."

Another responded to this quote from the article. "(The draft called on mortgage lenders to take more care when dealing with less credit-worthy borrowers by assessing whether they can cover long-term payments and warning them about hidden costs.)"

"Great. As long as the going-in FICO is high enough, you can still nail-em with loans they can afford and exploding terms. Long live Alt-A, until the huge wave of defaults means no one will fund them anymore."

Another questioned. "What exactly is the 'fully indexed rate'? Is it the maximum it could adjust to? Is it the current fixed rate? What is it?"

One reader made this distinction. "These rules aren’t rules at all, they’re guidelines. Rules, also known as regulations, are published in the federal register as such and must be promulgated in accordance with the Administrative Procedure Act. These guidelines are simply statements of policy. A bank regulator cannot take direct enforcement action against institutions that don’t conform to the policy (but can for violation of a regulation)."

"The way the guidelines work is if a bank adopts them, then the regulator will take the position that the bank is operating in a safe and sound manner. If the bank does not adopt them and the regulator wants to take action against the bank, the regulator would still have to show, with evidence, that the bank is acting in an unsafe and unsound manner."

"Also, these guidelines only apply to subprime credits, loans to persons with a poor credit history. Teaser-rate, option-pay, and similar loans to persons with a good credit history (high FICO) do not fall within the guidelines."