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Mortgage Lending: The Impact

CRL has been an important voice advocating for reforms in the mortgage market both in the lead up to and in the wake of the Housing Crisis. In particular, we have been involved in making the following changes to the mortgage lending environment:

  • In January 2015, plans were announced to reduce FHA mortgage premiums and preserve sound underwriting and strong consumer protections.
  • In January 2014, important consumer protections, put into law in Dodd-Frank, were enacted. Lenders must consider whether a borrower has the ability to repay a mortgage. This change means an end to "no-doc" loans. Lenders also have incentives to originate a new category of loans called Qualified Mortgages. These "QM loans" restrict risky product features like excessive fees and teaser rates. Other reforms include new servicing standards, appraisal, escrow and loan originator compensation rules.
  • States and federal regulators have taken many steps to outlaw subprime mortgage lending abuses (2007-2008). CRL was one of the first to sound the alarms about subprime mortgage lending abuses and the pending foreclosure crisis, leading a number of states and federal banking regulators to implement new requirements for mortgage underwriting. These reforms ultimately laid the foundation for federal mortgage reform in Dodd-Frank.
  • Settlement in State Attorneys General "Robo-Signing" case (2012). CRL worked with attorneys to bring one of the first cases highlighting this abuse and brought the issue to the attention of the regulators. Savings: $25 billion in relief to distressed homeowners.
  • Model legislation on broker licensing enacted in North Carolina and subsequently in other states.
  • Pre-crisis reforms included:
    • Elimination of financed singled premium credit insurance in mortgage loans.
    • Near elimination of mandatory arbitration clauses in mortgage loans.
    • Substantial reduction of the term and amount of prepayment penalties in subprime mortgage loans.
    • Industry-wide reduction in maximum upfront fees charged on mortgage loans.

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