The Lastest on New Financial Regulations in Congress

By Kate Cavallaro

                Congress is still negotiating over the terms and provisions of new financial regulations.  Lenders and the mortgage industry are making efforts to “soften a series of provisions that reshape how most Americans obtain home loans.”   As they are now, the proposed legislations would include new standards for underwriting, increasing lender responsibility, a change in the way loan originators are paid and new consumer rights to seek damages when mortgage payments become troublesome.  One way the bill induces the mortgage industry to take greater responsibility is by requiring lenders to retain a 5% stake in certain loans that are bundles with others. This required stake will increase the likelihood that the lenders will make sound loans.  Another example of a change in the industry standards is that the new legislation will require that lenders show that if a borrower refinances, the refinancing provides a “tangible benefit to the borrower.”  Lenders on the other hand are looking for ways to minimize the impact of this new proposed legislation.  For example, lenders want to limit the amount of time that borrowers can dispute a foreclosure actions if the borrower later discovers that their loan did not satisfy new standards.  As the bill stands now, it does not include a statue of limitations provision for those particular types of foreclosure claims.  Nick Timiraos writes that consumer advocate are noting that these legislative changes “will make it easier for borrowers to shop for loans and compare prices,” and that the “new provisions will shift the burden of proof from the consumers having to protect themselves from unreasonable fees to the providers of services justifying their costs.”

See Nick Timiraos’ article, “Mortgage Players Look to Soften Bill”, in today’s Wall Street Journal for more on this topic.