Federal Reserve Board Approved New Rules Regulating Home Mortgage Loans

July 14, 2008

The Federal Reserve Board today approved new rules regulating home mortgage loans under Truth in Lending Act (TILA) under the Home Ownership and Equity Protection Act (HOEPA). In addition to protecting consumers from unfair or deceptive lending practices, the rule will increase competition by providing a level playing field for lenders to the benefit of consumers. The rules require lenders to verify a loan applicant's income and assets, determine the borrower's ability to repay the loan from sources other than just the home's value, eliminate prepayment penalties and require all first mortgages have escrow accounts for property taxes and homeowner's insurance.

The rule also sets advertising standards, restricts deceptive appraisal practices, requires lenders credit loan payments on the date of receipt, provide a payoff statement to borrowers within a reasonable amount of time after request and provide a Good Faith Estimate (GFE) within three days of an individual applying for refinancing, a home improvement loan. The new rules do not require disclosure of Yield-Spread Premiums (YSP's) as originally proposed.

More information about the Federal Reserve Board's action can be found here.

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