Federal Reserve Board governor Elizabeth Duke Friday promised Congress that the Fed will continue to insist that banks engage in “fair lending” and will curb any kind of credit discrimination while at the same time promoting “safe and sound” loan underwriting.

Duke, in testimony prepared for the House Financial Services Committee, said the expansion of suprime mortgage loans to less creditworthy borrowers earlier this decade led to “lax underwriting” and unsustainable loans. But she said the Fed must nevertheless fulfill its statutory duty to make sure credit is not denied due to such practices as “redlining,” in which minorities are singled out for loan rejections.

She said the Fed has detected cases of discriminatory lending practices, for which it has punished banks. And she also said there has been “a significant increase in suspected criminal activity with respect to mortgage fraud and other mortgage-related criminal activity” in recent years.

— Market News International

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