Daily Real Estate News  |  June 17, 2009  |   Consumer Agency Wants to Revamp Lending
The new consumer protection agency announced Tuesday by the Obama administration would overhaul current U.S. mortgage lending practices.

The new agency would require lenders to offer mortgages with simple terms along with more complex loan products, according to a fact sheet from officials. Mortgage brokers would be required to present home owners with the best available mortgage loans and ensure that borrowers could afford them. There would be bans on prepayment penalties and so-called "yield spread premiums," which provide incentives to brokers to steer borrowers to more expensive loans.

The new rules would apply nationwide to all lenders, although states could make the rules tougher.

The Mortgage Bankers Association was unenthusiastic about the proposal. "This seems to be redundant of the current regulatory regime. We see the risk of duplicating efforts, of having overlapping standards and creating confusion in the marketplace," says Steve O'Connor, senior vice president for government affairs at the Mortgage Bankers Association.

Source: The Wall Street Journal, Jessica Holzer (06/17/2009)