New Federal Rules to Protect Borrowers of Mortgages in Real Estate Transactions

On July 23, 2009, the Federal Reserve instituted new protections for borrowers for home-equity loans and mortgages. The protections seek to review the content of disclosures to consumers and the timing said disclosures are given; further, they add “teeth” to the regulations to prevent kick backs for steering consumers to higher cost (interest rate/closing costs) mortgage loans. The Vice Chairman of the Federal Reserve, Mr. Donald Kohn, said publicly that this will help consumers make more informed decisions in the lending (mortgage) process.

Under these new Federal guidelines, consumers would receive more notice in the form of disclosures to costs after applying for a mortgage; also, if the mortgage contains any risky items such as a negative amortization, then a one page document would accompany the application clearly explaining this to the consumer. This would include warnings about balloon payments associated with Adjustable-Rate Mortgages known as ARMs.

The public at large will be given an opportunity for approximately 120 days to comment on these new mortgage disclosure proposals before the new rules are finalized and implemented. The National Association of Mortgage Brokers are currently reviewing these proposals.
Mark Blane
Founder of The Law Offices of Mark Blane, APC
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