28. July 2010 13:52
The recent financial overhaul passed by Congress is complex. We won’t see the full implications for some time but we do know what the major changes will be. Are you trying to figure how this directly relates to you? Below are a few changes that consumers will see.
Mortgage Brokers will no longer be allowed to receive commission based on the interest rate for a home loan. The goal is prevent brokers from steering customers to higher interest rate loans which increase their commission.
Originators of residential mortgages will be required to disclose any conflicts of interest and compare costs and benefits offered to a potential borrower.
Lenders will be required to verify whether or not a borrower will be able to repay a loan plus associated taxes, insurance and other costs. It will require more documentation from applicants.
Lenders are prohibited from refinancing an existing mortgage unless there is a net benefit to the borrower.
Prepayment penalties will be prohibited or limited depending on the type of loan.
Homeowners who are unable to make a mortgage payment due to the loss of a job or a medical condition may qualify for up to $50,000 in assistance through HUD’s Emergency Mortgage Assistance Fund.
Banks will be required to hold on to at least 5% of the loans they make instead of selling them to investors. The thought is that this will reduce the chances that a bank will make a risky loan if they will be stuck with it.
If you are turned down for a loan because of your score, you can get your credit score for free. There was some disappointment that everyone can’t access their credit scores a few times a year. The difficulty with offering free scores is that lenders use different ones. This rule will at least allow you to see the one that played a factor in your denial.
Credit and Debit Cards
The Consumer Financial Protection Bureau has been created. It has the authority to regulate mortgages, credit cards, payday lenders, check cashing companies and lenders that provide private student loans.
The new Financial Stability Oversight Council will assess and manage risks that could threaten the whole U.S. financial system.
Financial Advisor Disclosures
To read more about the financial overhaul check out:
AICPA Summary of the New Financial Reform Law
USA Today “Financial Overhaul and You”
Mint Life Blog “What Will Wall Street Reform Mean for You?”
ABC News “Top 6 Changes That Financial Reform Brings to Consumers”