Helping consumers compare loan options is key to reducing the risk of foreclosure, which can occur when a borrower no longer has the ability to pay.
Los Angeles Foreclosure Lawyer Vincent D. Howard has learned that the Consumer Financial Protection Bureau is now proposing a new set of rules that would increase regulations on mortgage companies, while boosting protections for buyers.
This could be an important move, considering that the entire mortgage industry came under fire during the 2007-2009 economic crisis, fueled by reckless lending that led scores of people to purchase houses they couldn't actually afford.
This measure would be a provision to the Dodd-Frank Wall Street Reform and Consumer Protection Act, that was passed in the wake of the housing bubble. The act itself is intended to reduce federal dependence on large, unregulated banks and to address a number of underlying and recurring issues within the financial industry. It also granted the bureau the authority to regulate the financial sector and provide greater transparency and access to mortgage information and credit scores.
The proposal targets the different fees that are attached to many mortgages, as well as the points borrowers can rack up by making payments to reduce their interest rates. These practices often make it tough for borrowers to review a side-by-side comparison of competing loans.
If approved, the new provision would mandate that creditors would have to provide consumers information about alternative loan options in which there are no fees attached or whether they could gain points on their interest rate by making a larger payment upfront.
Even if approved, the provision won't be finalized until January, pending public input for the next two months.
The Dodd-Frank Act had banned most fees or points for the majority of loans. This measure would allow banks to continue using them, so long as consumers are informed of their options.
Prior to this act, brokers and loan officers had a vested interest in having consumers purchase loans that they could not afford. Plus, there were varying standards of qualification for loan officers depending on who those individuals worked for. This measure is intended to change that, and mandate a certain set of standards for these individuals.
Essentially, the industry would no longer be able to use loan interest rates in figuring the broker fee.
Still, this doesn't help the hundreds of thousands of homeowners who are currently underwater, and there will inevitably continue to be those individuals who are still going to fall behind. A recent study by the Amherst Securities Group suggests that the best way to prevent foreclosures is to reduce the outstanding principal, to put it closer in line with the current home market value.
Last year, Amherst determined that just 12 percent of borrowers who land principal reductions re-default. Compare that to the 23 percent of borrowers who re-default after receiving some mortgage modification involving their interest rates or the 30 percent who fell behind again after being granted a forbearance.
Our Los Angeles foreclosure attorneys are prepared to help you find a solution to keeping your home and helping you avoid foreclosure.
Los Angeles Foreclosure Attorney Vincent Howard at HOWARD LAW can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.
Consumer Bureau Seeks to Make Mortgage Fees Clearer, Staff Report, The New York Times