Financial reform helps homebuyers (for the most part)

There is a LOT in the proposed financial reform bill (soon to be signed in to law), and it is generally acknowledged to be the most sweeping bill for the financial industry since the Great Depression.

Kenneth Harney of The Washington Post breaks down some of the highlights:

Although the bill does not ban stated loans, option ARMS or “pick-a-pay” programs, the bill really pushes lenders to offer fully documented loans.  Not only will new guidelines determine if the borrower can make the payment, they will also have to show that they can pay taxes and insurance. 

Many of the prepayment penalties will be eliminated, but “Prepayment penalties would still be permitted on income-verified standard loans, but lenders would be required to offer alternative financing without penalties for early payoffs.”

Another likely element is a “mandatory provision of credit scores when mortgage applications are turned down.”   It is also likely that mandatory arbitration clauses found deep in some documents will be elminated.  The new Consumer Protection Angency will restrict these clauses if they find them harmful to the borrower. 

On the downside, it looks like the elimination of the Home Valuation Code of Conduct was not eliminated.  This was an overshot by the Feds and does not help the consumer. It clogs up lender pipelines making it harder to close escrow.  Also, the new Good Faith Estimate needs to be revised as it is confusing to both the loan officer and the borrower.

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