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Obama Economic Reform Plan Would Restructure Mortgage Industry to Stop Predatory Lending

June 19, 2009

The Obama Administration's plan to reform how the financial industry is regulated would include substantial new powers to curb abuses in the mortgage industry, Dow Jones Newswire reported June 16. The plan was officially announced June 17 and will likely go through months of debate and restructuring in Congress before it becomes final. However, Dow Jones said an early report on its provisions included an outright ban on certain mortgage industry practices and new regulations for others, intended to give consumers greater information on the decisions they make. The plan also includes the creation of a Consumer Financial Protection Agency, which would have the power to enforce the law and add new regulations.

According to Dow Jones, one key provision of the administration's plan is a requirement for banks to offer plain, conventional loans along with "exotic" and more complex loans. Consumers would still be able to take out the complex loans, but they would have the ability to opt in. The plan would also substantially change the way mortgage brokers do business. Among other things, they would be required to give borrowers the option of taking out the best loan for which they qualify and ensure that those borrowers can afford the loans they do take out -- both areas that experts believe were subject to abuse. The CFPA would be able to ban yield-spread premiums and other practices that incentivize brokers to sell overly expensive loans. And brokers, banks and non-bank lenders would all be subject to CFPA oversight, ending the potentially spotty oversight caused by the current patchwork of state and federal regulators.

The proposal includes many provisions that don't apply to the mortgage industry, including consumer-protection provisions related to credit cards. However, as Chino Hills mortgage loan modification lawyers, we are very happy with this list of the Administration's goals. Because we work every day with financially struggling homeowners, we recognize the need for many of the reforms listed here. For example, as things currently stand, borrowers have no objective way to find out whether a mortgage broker is offering them the best loan they qualify for. During the housing boom, this allowed mortgage brokers and loan officers earn big bonuses by steering consumers into expensive loans. Curbing practices like these allows consumers access to the basic information they need to make an informed decision -- including a decision for the more expensive loan, if they decide that meets their needs.

Based in Anaheim, Howard Law LLP represents homeowners throughout California who need help convincing their lenders to give them a fair and sustainable mortgage loan modification. Our San Marcos loan modification attorneys have successfully negotiated for reduced interest rates, loan restructuring and other major changes. Even if your lender or servicer won't answer your phone calls, we can often get its attention simply because we are lawyers -- and when lawyers call, financial institutions get nervous. In many cases, we've been able to use evidence of predatory lending as ammunition to get clients a better deal. Our goal is always to keep clients in their homes by lowering monthly payments to a reasonable and sustainable amount.

If you're struggling to get your lender to consider a loan workout, the Valencia loan modification lawyers at Howard Law LLP can help. To set up a free, confidential consultation, please contact us online or call us toll-free at 1-800-872-5925.