The Federal Reserve says its controversial proposal, which would force borrowers to pay off the principal of a mortgage canceled because it violated Truth in Lending Laws, will be decided on by the Consumer Financial Protection Bureau, according to a report from Reuters. The proposal has drawn fire from consumer groups and lawmakers alike because it would likely be difficult for many homeowners to come up with that kind of money.
In addition, the groups say forcing consumers to pay back the entirety of the loan’s principal at once would cause homeowners to lose leverage in renegotiations, the report said.
The proposal was originally intended to add clarity to the cancellation process, which the Fed believes is currently confusing, the report said. By leaving the decision to the CFPB, the central bank hopes the rule will be passed with consumers’ best interests in mind.
The CFPB, which was formed as part of a provision of the Dodd-Frank Act, will not gain the power to make any regulatory changes until July 21.