The federal Consumer Financial Protection Bureau (CFPB) has announced new mortgage-lending rules that may have as beneficial an impact on banks as they will on consumers.
The new rules 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.
As a result, while the new rules provide many protections to consumers, there is also a giant protection, or "safe harbor," given to banks and lenders, reports CNN. Here are three things to know about the new rules:
- 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. To learn more about how these laws may impact you, you may want to talk to an experienced real-estate lawyer.