Laws Designed to Prevent Another Housing Crisis

In the aftermath of the housing collapse, the mortgage broker lispendenshelp024industry is a target for reform. Regulators and legislators at the state and federal levels are busy implementing a variety of laws and regulations designed to protect consumers and prevent another housing crisis in the future.

Here’s an overview of recently enacted state and federal legislation and regulation of mortgage brokers:

Brokers Must Act in the Interest of Consumers: About a dozen states have passed regulations requiring that brokers act in the best interest of consumers. If you are going to be a licensed, insured, bonded mortgage broker you are legally required to represent the interests of the borrower. Without rules like this, brokers are basically third-party agents that are getting paid to help borrowers but are disclaiming that responsibility in the fine print and accepting compensation from the lender that may not be in the buyer’s best interest.

National Mortgage Broker Licensing: A law signed by President Bush in 2008 establishes a nationwide mortgage licensing system to be in place by July 30 of this year. States have an additional year to establish a state loan originator licensing and registration system. The system requires all loan originators, including mortgage brokers, to undergo a substantial background check, including fingerprinting, and to take a minimum of 20 hours of continuing education, pass an exam and post either a surety or net worth bond.

Funds to Compensate Defrauded Consumers: Several states have established funds to compensate consumers who have been defrauded by mortgage brokers. In Florida, the Mortgage Guaranteed Trust Fund will make payments to consumers who have obtained a judgment against a mortgage broker or loan originator but are unable to collect from that individual.

Compensation Proposals: A number of state and federal proposals for regulation deal with mortgage broker compensation and disclosures of that compensation. A big hot-button issue is the yield-spread premium, which is a rebate paid to a mortgage broker or bank based on the difference between the lowest interest rate available to a consumer and the interest rate at which a consumer’s loan is closed.

For mortgage brokers, their incentive isn’t really to see loans perform in the long run, it is to close as many loans as possible. For unethical brokers, there is an additional incentive to extract as much fee income out of each deal. To get to the root of the problem, you have to address the incentives that prompted brokers to steer people to unsuitable products.

For more interesting information go to Would You Walk Away?

Allow me to help you find the home of your dreams Contact Eddie Perez at (201) 344-2886,

Explore posts in the same categories: Uncategorized

Tags: , ,

You can comment below, or link to this permanent URL from your own site.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: