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CFPB Could Pass New Mortgage Rules Soon

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The federal watchdog agency tasked with helping consumers avoid predatory and misleading lending practices on the part of lenders may soon pass more rules to make the mortgage market fairer for borrowers.

Experts in the real estate industry say the Consumer Financial Protection Bureau could finalize numerous new rules for mortgage lenders and servicers as early as Wednesday, according to a report from HousingWire. That estimate is based on the CFPB having scheduled public hearings for collecting feedback on Thursday and Jan. 17.

Among the most important of these rules for consumers is one that requires mortgage lenders to follow better-defined guidelines for determining whether a borrower has the financial ability to repay the home loan they’re seeking, the report said. The rule is expected to play a significant role in the industry going forward because it could lead to major alterations of mortgage products, especially those offered by smaller institutions.

As HousingWire reports, the CFPB could also pass rules for loan originator compensation, servicing practices, appraisals, high-cost mortgages and escrow later this month, according to Richard Andreano, a partner at Ballard Spahr. In general, it’s believed that the sweeping changes will be unprecedented in the industry.

“Overall, I don’t think there has ever been a period of time where an industry has had to implement so many wide-reaching changes,” he said. “The interesting thing is going to be what is the mortgage marketplace going to look like after this in terms of who is still in the marketplace making mortgage loans. Because of the amount of increased complexities, a lot of small banks were rethinking whether they want to be in the mortgage business.”

The CFPB has been making significant efforts to overhaul many different types of lending in recent months and has begun to wield its significant regulatory power more frequently under director Richard Cordray, who is approaching the close of his first year on the job.

The agency first began with a focus on credit cards, but has also turned its attentions to other issues that regularly trouble consumers, such as student loans and mortgages. This has even included focusing on the actions and methods of non-bank financial institutions that participate in consumer credit markets, such as mortgage services, credit scoring and reporting firms, and more.

Image: Ian Muttoo, via Flickr

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