In the run-up to the housing crisis, unscrupulous mortgage lenders too often led to risky and expensive lending terms because they would generate higher returns for themselves. The Federal Reserve Board, and then Congress through the Dodd-Frank Wall Street Reform and Consumer Protection Act, took significant steps to curb these unscrupulous lending practices. The CFPB is finalizing lender compensation regulations. Title XIV was introduced to set standards for the level of disclosure required for borrowers so that those obtaining a mortgage are aware of the obligations and risks. The title prohibits certain predatory lending tactics that were commonly used during the housing bubble, and also sets out certain provisions for loan changes that help modify and reduce mortgages that are completely beyond the borrower`s ability to repay. “Before the financial crisis, many mortgage borrowers were directed to risky and expensive loans because it meant more money for the lender,” said Richard Cordray, director of the CFPB. “These rules will make lenders more accountable by prohibiting the incentives that have led so many of them to lead consumers to disaster.” You can see that there is a section in the middle where you will be presented with other options, this will often be the upper and lower part of the price range available that day. You should ask your mortgage lender what other options are also available. In part five of my seven-part series on what changed after the mortgage collapse, I`ll focus on the anti-Steering Safe Harbor law. Disclosure of anti-incentive lending options is required when a mortgage lender is paid by someone other than their employer or borrower. This includes the lender. For mortgage brokers, if the lender pays them, it is mandatory.
High-cost mortgages include first mortgages with an interest rate that is more than 6.5% higher than the average prime rate, or second mortgages with an interest rate that is more than 8.5% higher than the average prime rate, as well as other definitions listed. See 15 U.S.C. § 1602 (Dodd-Frank Act, § 1431). In addition, to keep payments for expensive mortgages down, this title prohibits “balloon payments,” which increase rapidly, so that expected payments eventually double the average of previous payments. See 15 U.S.C. § 1639 (Dodd-Frank Act, § 1432). In addition, creditors may not recommend or encourage default on prior loans, charge high late fees, accelerate debt, fund prepayment fees or penalties, points or fees, or structure a loan to avoid such requirements. See id. (Dodd Frank Act, § 1433).
The rule does not allow a lender to pay an originator based on the terms of the mortgage transaction other than the loan amount. This means that a mortgage lender can`t guide you to a loan that pays them more. Title XIV amends the Truth to Lending Act (15 U.S.C. 1631) establish a duty of care for all mortgage lenders, which would require them to be properly qualified, registered and licensed, and to comply with all regulations drafted by the Federal Reserve Board to supervise their operations. See 15 U.S.C. § 1639(a), 15 U.S.C. § 1639(b) (Dodd-Frank § 1402). Mortgage lenders are prohibited from receiving compensation equal to the nominal amount of the loan, which should reduce the incentives for these originators to refer borrowers to residential mortgages that the borrower cannot repay.
See 15 U.S.C. § 1639(b) (Dodd-Frank Act, § 1403). Further powers to prohibit deceptive, unfair or predatory credit terms are given to the Federal Reserve Board, which can regulate all residential mortgages to ensure that the terms are in the interest of consumers and the public. See id. (Dodd Frank Act, § 1405). The economic depression of 2008 was triggered in part by the bursting of the housing bubble. Mortgages became extremely easy to obtain, and many of these mortgages had predatory provisions that made it difficult for borrowers to pay off mortgages in case their property values dropped. The final rule also implements the Dodd-Frank provisions that generally prohibit mandatory arbitration in mortgage and equity disputes for mortgage disputes and the practice of increasing loan amounts to cover credit insurance premiums.
Congress first states that efforts to reform housing lending practices and protections should include meaningful structural reforms by the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”). See Dodd-Frank § 1491. In addition, the subtitle commissions a GAO study on government efforts to detect mortgage foreclosure fraud and loan switching fraud, as well as a housing and urban development study on drywall in foreclosures. See id., §§ 1492 and 1494. The Homeowners` Emergency Fund will be available as of October 1, 2010, along with additional funding for neighbourhood stabilization programs. See 12 U.S.C. § 2703, 42 U.S.C. § 5301 (Dodd-Frank Act § 1496–97). Finally, this subtitle sets out a program to provide legal assistance in seizure to low- and middle-income landlords and tenants. See 12 U.S.C. § 1701x-2 (Dodd-Frank Act, § 1498). We have been trained to buy the best interest rates and terms, but what if we could get a written guarantee that the ones we get are the best from the lender? Well, that`s what the recently passed anti-Steering Safe Harbor law does: it requires your broker to write you a guarantee that your mortgage terms are the best they can offer.
Title XIV sets minimum standards for all mortgage products. Creditors can only grant a home mortgage if they reasonably determine that the borrower can repay the loan based on their credit history, current income, expected income and other factors. See 15 U.S.C. § 1639(c) (Dodd-Frank Act § 1411). Certain types of mortgages listed in this title and determined by the Federal Reserve Board are presumed to be repaid. See id. (Dodd-Frank Act, § 1412). Certain types of prepayment penalties are also prohibited. See id. (Dodd-Frank Act, § 1414). This title also states that a borrower may invoke a breach of these minimum standards as a defence to compensate or remedy damages. See 15 U.S.C.