The Federal Reserve is making new regulations for the mortgage industry, and trying to appease consumer advocates and mortgage industry players alike.
Of course, the result is something that no one is satisfied with. Consumer advocates say that loopholes remain to be exploited by unscrupulous lenders, and mortgage industry insiders say that the regulations are too restricting. CNN Money reports on what the Fed says about its regulations:
Bernanke said the proposals "were carefully crafted with an eye toward
deterring improper lending … without unduly restricting mortgage
credit availability."
Here are the basics of what the Federal Reserve is requiring of the mortgage industry:
- *Mortgage lenders won’t be able to make a "pattern or practice" of approving home mortgage loans that borrowers can’t really afford.
- *Mortgage lenders must verify income and assets.
- *Lenders must create escrow accounts for insurance and taxes.
- *Prepayment penalties must be limited.
Personally, I think most of these proposed regulations are simple common sense. Don’t get into the habit of giving out mortgage loans that borrowers can’t afford? Check income to make sure borrowers can afford the home mortgage loans?
That’s stuff that should have been happening anyway.
What do you think of the Fed’s regulations?
Thank you for sharing your insight, Donna! It's always nice to see some insider views.
I would like to see new regulations and fines set in place for mortgage companies who loose files that are in the process of being negotiated for a short sale. There seems to be a crisis with employees walking out on their jobs and files getting lost. This is causing more work for the realtors who are submitting these offers to the lenders. Just this past month I have submitted to two different lenders a short sale contract 5 times because the last person in their department quit and so the paperwork is lost. As a broker if I do not keep all my files I can face being fined. It's time the mortgage industry be held responsible for their actions or lack of.
I do agree it's a common sense for the lenders not to give out loans to borrowers who can't afford.