8/18/10

New Mortgage Rules

Fed Unveils Slew of Mortgage Rules

The Federal Reserve unveiled...rules...aimed at protecting consumers from abusive lending practices blamed for luring millions into unaffordable home loans.

The rules include a ban on yield-spread premiums, controversial payments that mortgage brokers have historically received in exchange for guiding consumers toward higher-interest rate mortgages.

...The ban, set to take effect April 1, would apply to both mortgage brokers and the companies employing them. It also would prohibit loan originators from steering consumers toward loans that aren’t in their best interest but would generate stronger returns for brokers or loan officers.

...Since the financial crisis started, the Fed has been criticized for failing to enact sufficiently stringent mortgage lending standards and for moving too slowly in curbing the practice of paying yield spread premiums.

The Fed...proposed that lenders clearly tell borrowers what their mortgage could cost them in a “worst-case” interest rate scenario.

In addition, the Fed rules would require lenders to tell borrowers when balloon payments or minimum payment options could hike loan amounts, and disclose how payments could fluctuate for borrowers who have adjustable- or step-rate loans.

Meena Thiruvengadam
Wall Street Journal

1 comment:

Ken Hill said...

As so often happens, rules create as many problems as they solve. Seller financing is now punishable by fines of $25,000. If the seller is Federally licensed, no such penalty. So one way for folks to sell and buy houses is now gone. Helps neither buyers nor sellers.