High-Cost Mortgage Borrowers (Finally) May Get Protection
High-cost mortgages have long been open to borrower abuse. In early July a federal consumer agency, the Consumer Financial Protection Bureau, proposed new rules to protect borrowers who opt for high-cost mortgages. The goal is financial transparency. What a novel thought!
What is a high-cost mortgage anyway? According to the agency, a high-cost mortgage is any mortgage with an interest rate that is 6.5 percentage points above the prime rate or a loan with fees exceeding five percent of the loan’s value. Using this definition, about 40,000 borrowers took out high-cost mortgages between 2004 and 2011.
The new rule requires borrowers to have private, financial housing counseling before they can qualify for one of these loans.
The rule also prohibits lenders from charging a balloon payment or lump sum at the end of the loan’s life. And it prohibits penalties for paying off a loan early. In addition, it limits late fees to four percent of the amount due each month.
You know lenders are squealing. The final ruling will come in January. Keep your fingers crossed.
((hugs)) from your Las Vegas Real Estate Concierge,
Managing Broker, Nevada