CFPB Announces Guidelines for New Mortgage Rules
True to its purpose as outlined in the Dodd-Frank Wall Street Reform Act, the Consumer Financial Protection Bureau has announced its goals for writing new laws to help protect consumers who enter into mortgage agreements.
When major financial institutions started crumbling in 2008, and it was discovered that banks had been writing thousands of irresponsible subprime mortgage loans, President Obama challenged Congress to rewrite the rules that govern Wall Street in ways that would promote transparency and engender consumer confidence in the shaky economy.
Part of the sweeping reform bill introduced by Representative Barney Frank and Senator Chris Dodd called for the creation of a new federal bureau to oversee non-bank financial institutions and investigate incidents of corporate abuse.
The CFPB has been operational for less than a year and has already started inquiries into student loans, payday loans and credit card interest rates - products that have been drawing criticism from consumers. On Tuesday April 10th they also announced a basic outline for changes to mortgage laws that they plan to finalize by the end of the year.
The changes are all aimed at helping homeowners understand their mortgage loans and avoid foreclosure. The burden will fall on mortgage servicers to provide monthly statements, inform homeowners of policy changes, and contact/ offer assistance to homeowners who are starting to become at risk of foreclosure.
Allegations and accusations ran rampant in the aftermath of the mortgage crisis in 2008, as the dust has settled financial experts have managed to trace the wreckage back to irresponsible and money-hungry banks and mortgage brokers who knowingly undermined the fragile balance of the mortgage system and put the welfare of millions of homeowners at risk. In all, over 8 million American's have lost their homes to foreclosure.
Just last month the U.S. government finalized a settlement with the country's five largest mortgage brokers who will pay $25 billion for their role in the mortgage meltdown. Not only will the banks start slashing debt on mortgages that they currently own, the money they are paying in the settlement will also be filtered into local governments and then into the hands of homeowners in the form of mortgage relief.
The combination of the strong sign sent by the U.S. government, that big business can no longer buy their way, and the new mortgage laws introduced by the CFPB, will provide crucial building blocks for a transparent and consumer-friendly financial market that America sorely needs in order to grease the wheels of our rusty economy.
By: Javi Calderon
