The new rules for banks have the sometimes contradictory aims of both protecting borrowers from predatory and unfair lending practices, as well as encouraging lenders to more freely give out loans.
New rules (1) No more teaser rates (those that adjust over time) (2) Up-front fees cannot be excessive.
According to a report by CNN while the new rules provide many protections to consumers, there is also a giant protection, or “safe harbor,” given to banks and lenders. Here are three things to know about the new rules for banks:
No more teaser rates. Banks and lenders will no longer be able to use teaser rates. These are rates that adjust higher after a set term.
Up-front fees cannot be excessive. Lenders would sometimes lull you in with attractive rates, but then hit you with higher up-front fees like points paid and other costs. These practices will be prohibited.
Banks are protected from lawsuits. While many of the rules protect consumers, the most notable rule is a “safe harbor” provision that protects banks and lenders. Under this provision, a bank that lends a “qualified mortgage” is immune from lawsuits filed by aggrieved borrowers, writes CNN. There is a test to determine whether a mortgage is qualified, but most traditional mortgages given out in recent years probably would be considered “qualified.”
The new CFPB mortgage-lending rules seem to offer many protections to consumers. However, many of these protections have already been implemented by banks in the wake of the mortgage meltdown. So the long-lasting impact of the CFPB rules may be the new protections for banks and lenders, as opposed to borrowers.
Banks have until January 2014 to comply with the new rules.
MUSINGS BY DIANE: “Those of us survived who the last real estate crisis will remember the “new agency that would solve all the real estate problems” – The Resolution Trust Corporation “RTC”. I have numerous stories about the complete ineffectiveness of the RTC. The CFPB has broken the typical bureaucratic mold – they are actually doing something for the consumer.”
Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.
*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*
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