Six years post-mortgage crisis, new housing rules, written by the Consumer Financial Protection Bureau, are taking effect this month.
One of the primary intentions to is protect Americans from the kinds of abusive lending practices that caused so many to plummet into foreclosure in recent years. While some have voiced concern that fewer people will be able to purchase homes as result of these new stringent regulations, economists believe this is the foundation for sustainable home ownership, characterized by the ability of home buyers to afford the loans they are given.
Of particular interest to our Miami foreclosure defense attorneys are the new protections announced for those who still have trouble paying their mortgage and ultimately default.
The consumer bureau’s director was quoted on Jan. 10, the day the new rules formally took effect, as saying that this was a way for consumers to avoid debt traps, surprises and runarounds – the kind of immensely frustrating and shady practices that have plagued the housing market in Florida for the last several years.
No longer will lenders simply be able to set their own loose terms for mortgage loan approval. Borrowers’ income, debt and assets will have to be carefully evaluated before home loan approval.
This might seem like common sense, but those kind of standard were set aside for years as banks sought to simply crank out as many loans as they could for as much as they could. The end result, as we saw, was that millions of homeowners were left underwater on their loans. They couldn’t pay. Foreclosure filings soared and many families were forced from their homes, their credit and finances ruined.
One aspect of the new laws that is less-than-thrilling, however, are the broader protections offered to lenders against borrower lawsuits. These protections are only allowable, though, if lenders limit upfront fees and set limits on certain risky features like set no-interest periods. Additionally, buyers can’t have a debt burden that exceeds 43 percent of their total income.
Lenders aren’t required to issue qualified mortgages, but they do have to make certain the borrower has the ability to pay what they would owe, at least on paper.
Some banks, such as Wells Fargo, said they intend to still offer some of the higher-priced loans, even at the risk of losing that additional protection against borrower lawsuits. Of course, large financial institutions likely aren’t exceedingly worried about lawsuits brought by consumers, as these are firms with enormous sums set aside to handle such claims anyway.
What is somewhat encouraging, however, is that the new rules outline specifications for how mortgage servicers must deal with defaulted homeowners. For a long time (and continuing today), mortgage servicers have been accused of mishandling borrower requests for reduced principal and interest payments – even after these firms were ordered to do so by multibillion-dollar, government-ordered settlements.
Other mortgage sevicer requirements include accurate maintenance of records, ongoing and open access to staffers and specified foreclosure alternative options for homeowners in default. Those who don’t follow these new rules will face government action by regulators.
Some have noted that some of the rules are unnecessary. After all, do we really need a regulation that requires servicers not to lose paperwork or to make sure they answer the phone when a customer calls? Well, we’ve seen what can happen when financial institutions aren’t held to these basic standards.
If you’re battling foreclosure in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Mortgage Wars,” discussing foreclosure topics that matter to YOU.
New mortgage rules aim to protect home buyers, owners, Jan. 10, 2014, By Danielle Douglas, The Washington Post
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Foreclosure Lawsuit Filed by Los Angeles Against Wells Fargo, Citigroup, Jan. 1, 2014, Miami Foreclosure Defense Lawyer Blog