Starting Saturday, the real-estate industry will be subject to new disclosure rules, courtesy of the Dodd-Frank law and the Consumer Financial Protection Bureau. Lenders will be required to make transparent and complete disclosure of the terms of mortgages — including all costs and fees.
This information was sorely lacking during the boom in the 2000s. Residential real estate peaked in the U.S. in 2006, and the housing bust that followed exposed the worst practices of the era. Common-sense disclosure could have curbed many of the more egregious and preventable abuses.
The new regs (details at theCFPB) also require a three-day grace period between the disclosure and the actual mortgage signing. In the past, closings were characterized by a flurry of signatures and initials — and it’s safe to say that most home buyers had no idea what they are signing, even after the cursory explanatory from their real estate attorney.
The rules were finalized two years ago and were initially scheduled to take effect in August. In response to industry concerns that the change could cause confusion in the height of the summer selling season, the agency postponed implementation until Oct. 3.
We should remember why these rules became necessary: During the housing boom, mortgage underwriting became a mass-produced, nondisclosed, poorly originated free-for-all. Unqualified buyers purchased mortgages that, in many cases, they did not know they could not afford. Many people believed they had inexpensive fixed-rate mortgages only to be surprised when these reset two years later.
Stories of abuse were rampant.
Continues here: Crocodile Tears From Mortgage Lenders
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Category: Financial Press
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Category: Financial Press