The CFPB has done it again. They’ve been hard at work making sure consumers are more empowered in every financial decision they make, and now they’re focusing on mortgages. Whether you’re a new home owner, well into your mortgage, or just starting to search for your first home, you will benefit from these changes – if you take the time to review them. Below we’ll talk about what these changes – set to take effect on Friday – mean to you.
Why the CFPB is Focusing on Mortgages
Remember the financial crisis of 2008? Pretty hard to forget, right? That came about when the subprime mortgage industry crashed after variable interest rates went up and people started to owe more on their homes than they were worth in the first place (otherwise known as being “underwater” on your mortgage).
So what happens when people go underwater on their mortgage and the interest rates increase their monthly payments? They end up in a situation in which they can’t make their payments and they can’t sell their house. Many Americans are still recovering from situations just like this and that’s why the CFPB is stepping in to create more protections for mortgage lenders.
The CFPB’s New Mortgage Rules: How They Affect Lenders
The new rules, highlighted on the CFPB’s website, will both serve to educate consumers and help to fix the mortgage lending system. On the lender’s side, the CFPB is making sure that lenders can truly understand a borrower’s ability to repay a loan before approving them. While this is already theoretically how lenders operate, the CFPB is taking it a step further:
“…they must look at a consumer’s income and assets, along with debt, and weigh this against the long-term monthly payments – not just a teaser rate. This back-to-basics approach is the very foundation of responsible lending. But in the lead-up to the financial crisis, it often did not happen.”
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Existing mortgage borrowers will benefit from these new rules as well, since the CFPB is now requiring mortgage servicers to credit payments and track paperwork more efficiently. Servicers are also required to respond to their customers faster, something that certainly wasn’t happening in the past when loan modification paperwork fell through the cracks – just in time for a home to go into foreclosure.
The CFPB’s New Mortgage Rules: Resources for Borrowers
Cleaning up lending practices isn’t all the CFPB is doing for mortgage borrowers. They’ve also released a wealth of information and resources to help borrowers deal with their lenders and servicers during every stage of the process. These resources, which can be found on the CFPB website, include sample letters consumers can use to communicate with their servicers, tips to dealing with a mortgage, answers to common mortgage questions, tools a consumer can use to find assistance in their communities, and a factsheet laying out the new rules.
In short, anything a consumer would need to know in relation to mortgages can now be located easily in one place – and the consumer can trust that the information is timely and accurate since it’s been regulated by these new rules.
Remember, the CFPB’s work to empower consumers is only useful if we take the time to absorb the knowledge given and act on it. Staying up to date on changes like this can make all the difference in the world to your financial future! If you are planning to buy a home soon, go check out the resources on their website and learn what the new rules mean for you. And if you have a mortgage or are planning to have one in the future, don’t forget to use our free Mortgage Resource Center to answer any questions you may have.
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