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Fed Cracking Down on Mortgage Lending

The headline reads, “Fed adopts plan to curb shady mortgage practices.” I found the story on Yahoo Finance after watching the same story on Headline news. The bullet point version (my comments/questions in italics):

— bar lenders from making loans without proof of a borrower’s income.
Sounds like the end of “No doc” and stated income loans.

— require lenders to make sure risky borrowers set aside money to pay for taxes and insurance.
Lots of loans require impound accounts that are part of the monthly payment already. The only time I had previously seen impounds waived was when the borrower had over 20% down. Lean something new everyday.

— restrict lenders from penalizing risky borrowers who pay loans off early. Such “prepayment” penalties are banned if the payment can change during the initial four years of the mortgage. In other cases, a penalty can’t be imposed in the first two years of the mortgage.
I’ve only seen prepayment penalties assessed within the first two to four years of a loan. Does this end prepayment penalties across the board?

— prohibit lenders from making a loan without considering a borrower’s ability to repay a home loan from sources other than the home’s value. The borrower need not have to prove that the lender engaged in a “pattern or practice” for this to be deemed a violation. That marks a change — sought by consumer advocates — from the Fed’s initial proposal and should make it easier for borrowers to lodge a complaint.

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