|New Mortgage Rule Intended to Protect Consumers
The Federal Reserve has adopted a new rule designed to protect consumers taking out mortgage loans. The rule, which becomes effective on Oct. 1, 2009, was written to prevent abusive or deceptive home mortgage lending practices. The rule amends Regulation Z, the Truth in Lending Act, and was adopted under the Home Ownership and Equity Protection Act.
Rule addresses categories of mortgage loans
The protections for higher-priced loans include
Rules for closed-end mortgages include prohibitions against failing to promptly credit a payment to a consumer's account and against encouraging an appraiser to misrepresent the value of a home. For this type of mortgage, a creditor must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for a mortgage loan secured by the consumer's principal dwelling.
For all mortgages, lenders' advertisements will be obligated to include information about rates, monthly payments, and other loan features.
Consumers to receive information up front
These rules will apply to all lenders, not just those supervised by the Federal Reserve.
July 30, 2008