Mortgage Reform Laws
- Learn about new mortgage regulations.real estate image by Andrei Merkulov from Fotolia.com
Mortgage reform laws have been written and passed to protect borrowers and regulate lenders. These laws form the foundation of the system under which mortgage loans are created. Laws have even been enacted to help alleviate the mortgage industry fallout that began in 2007. - This act created legislation to combat abuses in the mortgage lending market and provide basic protections to mortgage consumers and investors. The bill established a federal duty of care, prohibited steering (which is requiring or guiding borrowers to use a specific lender, title company or other companies in the mortgage process), and called for licensing and registration of mortgage originators. The legislation also set a minimum standard for all mortgages that states that borrowers must be reasonably able to repay their loans. The act attached limited liability to those who package and sell interest in home mortgage loans on the secondary market. The bill also contained foreclosure protections for renters.
- H.R. 3221 is a collection of more specific acts that increased industry regulation and helped homeowners on the brink of foreclosure. The Federal Housing Finance Regulatory Reform Act of 2008 addressed various issues of residential real estate financing through FHA, Freddie Mac and Fannie Mae, ensuring that the government-sponsored home loan agencies don't shut down. The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 was created to regulate the mortgage broker industry, requiring brokers to work under a nationwide regulatory system. This system includes background checks, training, testing and continuing education. The HOPE for Homeowners Act of 2008 allowed for certain homeowners to refinance to avoid foreclosure. H.R. 3221 has allocated billions of dollars to fund counseling agencies that specialize in foreclosure avoidance and to expand the nation's supply of affordable housing.
- This bill was created to prevent the initialization of bad loans. It carries over many of the useful laws instituted in H.R. 3915. First, it required that lenders ensure the borrower's ability to repay the loan based on income, credit history and indebtedness. It prohibited unfair lending practices like financial incentives for subprime loans. The act also made participants in the secondary mortgage market liable for ensuring responsible lending. Under this law, creditors are responsible for their own loans. Penalties are imposed for irresponsible lending (rescission of loan, paying all costs for the rescission). H.R. 1728 offered stronger consumer protections for high-cost mortgages by prohibiting excessive fees, prohibiting the financing of points and fees, prohibiting practices that increase the risk of foreclosure, and requiring more pre-loan counseling. The bill established additional disclosures for borrowers and protected tenants from foreclosure. The act also created the Office of Housing Counseling within HUD to provide homeownership counseling and legal assistance to those facing foreclosure.
