The relaxed borrowing standards used by banks before the mortgage bubble burst seems like a distant bad dream at this point, but the reality is that for many Florida borrowers, that irresponsible lending has had lasting consequences. While many banks have voluntarily gone back to more sensible practices (like verifying income on credit applications), regulators knew it was time to set stricter laws to prevent mortgage lenders from making the same mistakes twice.
New regulations announced by the Consumer Financial Protection Bureau (CFBP) will help empower borrowers to know more about their loans and have a better sense of what it will take to repay before they sign any documents. One of the major problems of the pre-bubble burst lending bonanza was that consumers were not properly informed about the agreements they were making. Bankers eager to make a commission would rush them through paperwork or in some cases mislead borrows about the terms of a loan, leaving homeowners shocked when a statement with a balloon payment on it appeared in the mail.
The CFPB will now help borrowers identify safer loans by offering certification for loans that meet specific criteria. In exchange, the CFPB will also provide some protection from lawsuits for lenders who participate.
There are many complex rules that apply to these loans on both the lender side and the borrower side, which will go into effect this month, from which point lenders will have a year to fully implement them.
For Florida borrowers who have been burned by a bad mortgage in the past, this is certainly welcome news if they are looking forward to homeownership again in the future.
Source: CNN, “New rules aim to make mortgages safer,” Les Christie, Jan. 10, 2013.
Information about what Florida homeowners can do if they are unable to afford their home loans is available on our Central Florida mortgage foreclosure page.