Consumer Watchdog Agency Proposes New Mortgage Disclosures
July 10, 2012
Mui, Ylan Q.
On July 9, the Consumer Financial Protection Bureau (CFPB) issued new proposals that would require mortgage lenders to provide loan applicants with new disclosure forms that spell out the interest rate, monthly payment, any changes that will occur over time, and any maximums as well as highlight such risks as negative amortization. In addition to eliminating controversial expenses such as balloon payments and prepayment penalties, the proposals also would flag as "high cost" mortgages with interest rates 6.5 percentage points above the average prime rate or fees higher than 5 percent of the loan value and would mandate borrower counseling for those products. "We want a mortgage market that is fair -- one where people can get a fair shake and businesses can compete fairly with one another," said CFPB director Richard Cordray. The public has 60 days to submit feedback on the high-cost mortgage definition, which federal law requires to be finalized by January; while the comment period for the rest of the disclosure forms will remain open for 120 days.
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