As we mentioned last month, the Federal Reserve Board approved new rules to protect mortgage borrowers from unfair, abusive, or deceptive lending practices that can arise from loan originator compensation practices. Scarlette Tuley, a lawyer in our Consumer Fraud Section, has taken a close look at the new rules. She has some more information for this issue on the rules, as we promised. The new rules apply to all persons who originate loans, including mortgage brokers and the companies that employ them, as well as mortgage loan officers employed by depository institutions and other lenders. The final rules, which apply to closed-end loans secured by a consumer’s dwelling, will:
offering less favorable terms in order to increase the broker’s or loan officer’s
The rules provide a safe harbor to facilitate compliance with the anti-steering rule. The safe harbor is met if the consumer is presented with loan offers for each type of transaction in which the consumer expresses an interest (that is, a fixed rate loan, adjustable rate loan, or a reverse mortgage); and the loan options presented to the consumer include the following:
(1) the lowest interest rate for which the consumer qualifies;
(2) the lowest points and origination fees, and
(3) the lowest rate for which the consumer qualifies for a loan with no
risky features, such as a prepayment penalty, negative amortization, or a
balloon payment in the first seven years.
The final rules go into effect April 1, 2011. If you need additional information contact Scarlette Tuley at 800-898-2034 or by email at Scarlette.Tuley@beasleyallen.com.
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