The Federal Reserve Board Passes New Regulations

By Author: David Reinholtz
Total Articles: 48
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What consumer advocates have been fighting for throughout so many years is finally coming to fruition, but it might seem that it is a little too late. Of course, hindsight is always twenty-twenty and when it comes to government action, being a decade or two behind the curve will tend to be along the norm. But whatever one feels about action on the part of the government, the new rules for the mortgage industry will help breathe a bit more confidence in a shaky consumer public.

Going into effect when?

Of course, any change in policy usually takes some time to implement. And with that, the inevitable push to continue to do business ‘as is' before the new rules go into effect. However, it begs a major question with the new regulations that they are not going to be placed into effect until April 1st of 2011. That is more than nine months away, with a great deal of potential buying power from consumers in the housing industry. It is this author's concern that because of the government's failure to enact stricter regulations earlier, the news about this regulatory change will lead more consumers to pause, ...
... hesitate, or balk at certain mortgage opportunities.

If this is the case, the burden is on the mortgage industry as a whole to ensure potential homebuyers of the terms in their mortgage and be as open and up front as possible with all of the details, not just the ones that may be most prominent. It will also be important that no one broker or agent be seen as trying to ‘push' a homeowner into a higher mortgage amount or rate than they are comfortable with.

Homebuyers are a different breed today

The housing industry has changed dramatically in the past couple of years and the changes that we have experienced have been passed onto a more conscientious buying public. The news of mortgage fiascos, of signing people up for mortgages who didn't have jobs, who couldn't afford the terms, and all those other malfeasance actions of the unscrupulous brokers and agents, have left a sour taste in the public's mouth. That isn't likely to change overnight and with this news, they will be more likely to look at the deals offered with a wary eye.

Homebuyers are not going to be so quick to sign on the dotted line as a result of the past few years' revelations. And it shouldn't be misinterpreted in any way, shape, or form our opinion of these new regulations - they are long overdue and welcome. They will, however, make it a bit more challenging between now and next April for those of us who are respectable and honest with our clients to compete for some mortgages when other businesses will be attempting to get as many signed and for the highest amounts possible.

The regulations, in a nutshell

Under the new rules, lenders will no longer be allowed to pay mortgage originators more money if they talk a homeowner into a more expensive loan. Lenders will also have to be completely forthright with the homebuyer about what their highest payment would be if the loan rate adjusted. These are almost common sense topics and items that we have already seen homeowners asking on a regular basis. As stated earlier, the current homebuyer is a much different creature than he or she was just a few short years ago.

These new regulations won't change the industry in any major fashion, but it will help it take some small steps toward full recovery, bringing a level of trust back to the homebuyer that they should have never had to endure losing.

David