New Mortgage Law to Help Borrowers
Applying for a Loan and Want to Know How the Law Affects You?
Jul 21, 2009
The Federal Reserve is set to introduce a new set of mortgage laws, rules and regulations on the 30 July 2009. Both new and existing borrowers who are seeking a primary or secondary home loan will benefit from the changes. Applying for a loan now comes with borrower protection.
New Mortgage Laws
- Disclosure of mortgage costs within 3 days of applying for a loan.
- Lenders are prohibited from collecting loan and mortgage fees until a loan cost disclosure has been provided.
- Quick closing will no longer be possible, necessitating a 7 day waiting period.
Applying for a Loan
Anyone applying for a loan can pull out of a loan or mortgage agreement if the lender fails to provide an initial disclosure of the estimated loan costs within 3 business days. This information is essential as it allows a potential borrower to see the full terms of the agreement, including the APR, in black and white.
No Up-Front Mortgage Fees
The new loan laws prevent a lender from collecting a mortgage fee until a full loan cost disclosure has been provided. The lender is permitted to make a charge for performing a credit check. However, the days of up-front payments charged by mortgage brokers will be unlawful from 30 July, 2009.
Loan Laws Prevent Quick Closings
A seven-day closing off period must now be provided once the loan applicant receives their early disclosure personally or via post. This cooling-off period will mean that a new borrower has a week to decide whether this really is the right option for them.
Repercussions of the New Mortgage Laws
- Settlements may be delayed if appraisers have a backlog and are unable to produce the valuation report quickly enough.
- There will be fewer instances of changing APR's and hidden fees than under current loan laws. This could potentially save borrowers hundreds of dollars.
- Non-compliance with the legislative changes are likely to lead to an increase in associated litigation. There are already a number of specialists within the legal profession that specialize in lawsuits against mortgage companies.
New and existing homeowners applying for a loan will shortly be protected by a range of loan and mortgage laws. This means that borrowers will not face up-front fees from financial institutions and mortgage brokers. A cooling-off period will also be available to provide a degree of breathing space so a decision can be reached regarding whether additional finance really is the right option.
Readers who found this article useful may also be interested in a series of helpful tips and advice for first-time buyers.
Sources
Harney, Kenneth. (16 July, 2009). "New federal rules protecting applicants for home loans take effect July 30." The LA Times.
Disclaimer: This article in no way attempts to provide legal, financial or tax advice. One should consult a licensed attorney, tax advisor, or other qualified financial professional before proceeding.
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