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New Federal Mortgage Rules and How They Affect Consumers

With a major foreclosure crisis at hand and a slumping home market, the Federal Reserve Board is looking to make some changes in federal mortgage rules. While some of these changes may help curb abusive lending for a time, they clearly do not give consumers the protection they need. After the proposed rules were released by the Federal Reserve Board, several consumer groups outlined their own ideas for changes. Many revolve around the idea that there needs to be more protection for consumers in order to get truly fair lending. Here's an outline of what consumer groups are looking for.

What Consumers Want

  • Lenders need to conduct a realistic and legitimate income analysis of applicants. Many new home buyers get themselves in trouble by purchasing a home they can't really afford. It's up to the lender to verify their income and approve them for a loan they can actually afford.
  • Homeowners should be able to more easily prove appraisal mistakes and fraud. This would require lenders to monitor appraisers closer, but could also open the possibility of incentives for doing so.
  • Lenders should promote APR rates more prominently so consumers can shop based off it. The APR is the one universal factor that all consumers can use when comparing mortgages.
  • Eliminate any prepayment penalties. Prepayment penalties are unnecessary and generally do not buy down the rate. At the very least, prepayment penalties should terminate before any rate changes.
  • Make significant requirements for mortgage providers. With so many consumers forced to foreclose their homes, there's a clear need for better protection. Lenders should have to provide reasonable loss mitigation before foreclosure.
  • The rules need to cover all aspects of the home market, such as home equity lines of credit and prime loans.
National Rate Averages

Mortgage Rates

Product Rate
5/1 yr ARM 3.147%
1 yr ARM 3.299%
15 yr fixed 3.221%
30 yr fixed 3.815%

Home Equity Rates

* Updated Jun 8, 2012