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Fed proposes HOEPA revisions for comment.

The Mortgage Bankers Association (MBA) has cautiously endorsed proposed changes by the Federal Reserve to Regulation Z (Truth in Lending Act) under the Home Ownership and Equity Protection Act (HOEPA).

Published in the Federal Register on Jan. 9, the rules would restrict certain mortgage lending and advertising practices and would also require certain mortgage disclosures to be provided earlier in the transaction. Public comments on the proposed rule must be received by the Fed by April 8.

"The goals of the amendments are to protect consumers in the mortgage market from unfair, abusive or deceptive lending and servicing practices while preserving responsible lending and sustainable homeownership; ensure that advertisements for mortgage loans provide accurate and balanced information and do not contain misleading or deceptive representations; and provide consumers transaction-specific disclosures early enough to use while shopping for a mortgage," stated the Fed in the proposed rule.

While concerned that some of the restrictions in the proposals may unnecessarily limit the credit options available to borrowers who should otherwise qualify for homeownership, MBA supports the Federal Reserve's efforts, according to MBA Chairman Kieran P. Quinn, CMB.

"The board's proposed rule announced today [Jan. 9] strives to strike the balance between ridding the marketplace of abusive lending practices, while still preserving credit opportunities for worthy borrowers," said Quinn. "This is a fine line to walk, and it is obvious that the officials at the Fed put a lot of thought into this proposed rule."

The proposed revisions would apply four protections to a newly defined category of higher-priced mortgage loans secured by a consumer's principal dwelling, including a prohibition on a pattern or practice of lending based on the collateral without regard to consumers' ability to repay their obligations from income, or from other sources besides the collateral.

The proposal would apply three new protections to mortgage loans secured by a consumer's principal dwelling regardless of loan price, including a prohibition on a creditor paying a mortgage broker more than the consumer had agreed the broker would receive.

The Fed also seeks to require that advertisements provide accurate and balanced information, in a clear and conspicuous manner, about rates, monthly payments and other loan features; and to ban several deceptive or misleading advertising practices, including representations that a rate or payment is "fixed" when in fact it can change.

Finally, the proposal would require creditors to provide consumers with transaction-specific mortgage loan disclosures before they pay any fee, except a reasonable fee for reviewing credit history.
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Title Annotation:Briefing Book; Home Ownership and Equity Protection Act
Comment:Fed proposes HOEPA revisions for comment.(Briefing Book)(Home Ownership and Equity Protection Act)
Publication:Mortgage Banking
Geographic Code:1USA
Date:Feb 1, 2008
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