Mortgage Reform

The United States House of Representatives just passed a mortgage reform bill. The Mortgage Reform and Anti-Predatory Lending Act which will help protect consumers when obtaining a mortgage protecting them from unfair, deceptive or abusive practices. In addition, to make sure borrowers are offered mortgages that they can reasonably afford to repay.

Mortgage loan origination standards

• Mortgage originators be qualified, when required, be registered and licenced as a mortgage originator in accordance with State or Federal law
• Diligently work to present the consumer with a range of residential mortgage loan products for which the consumer likely qualifies and which are appropriate to the consumer’s existing circumstances, based on information known by, or obtained in good faith.
• Make full, complete and timely disclosure of the costs of each mortgage loan product being offered to the consumer
• The relationship of the mortgage originator to the consumer, if the originator is or is not acting as an agent of the consumer, the costs of originating the mortgage loan and any relevant conflicts of interest
• Certify to the creditor that the mortgage originator has fulfilled all the requirements

Prohibition on Steering Incentives

• The total amount of compensation from all sources may not vary from loan to loan
• Prohibit a mortgage loan originator from steering a consumer into a mortgage that the consumer lacks a reasonable ability to repay
• When refinancing, does not provide a consumer with a net tangible benefit, has predatory characteristics or effects such as equity stripping, excessive fees or abusive terms
• Lending practices that promote disparities among consumers of equal credit worthiness but of different race, ethnicity, gender or age
• Charging excessive points and fees

There are other standards and provisions in the bill including liability provisions for violations of the mortgage standards listed above. The amount of liability cannot exceed the total actual damage to a consumer or an amount equal to 3 times of the total amount of compensation the mortgage originator received for the mortgage and reasonable attorney fees.

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