This is nice, but...

The Federal Reserve has just announced some much needed changes to the rules governing lending in the U.S. You can read the initial reports here.

Here is what the boss-man had to say about why they are doing this:

"The proposed final rules are intended to protect consumers from unfair or deceptive acts and practices in mortgage lending, while keeping credit available to qualified borrowers and supporting sustainable homeownership," said Fed Chairman Ben Bernanke. "Besides offering broader protection for consumers, a uniform set of rules will level the playing field for lenders and increase competition in the mortgage market, to the ultimate benefit of borrowers."

After a quick review of the proposed changes, I can't say that i disagree with any of them. Here are a few examples of the guidelines that were released (from money.cnn.com).

• Creditors and mortgage brokers cannot coerce a real estate appraiser to misstate a home's value.



• Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees. Also, they must credit consumers' loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.



• Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan, including home improvement loans or refinancings. Currently, these estimates are only required for home-purchase loans. Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer's credit history.



• In advertisements, companies must include additional information about rates, monthly payments and loan features. The rule also bans seven deceptive practices, such as saying a rate is fixed when it can change.

While I approve of these changes and guidelines, there are a couple of things to keep in mind.

1. How does this help us now? These guidelines are intended to prevent people from getting trapped in sub-prime loans. NEWS FLASH! I could not get a you a sub-prime loan if I wanted to right now. Not that I want to. Much of this language was created to prevent people from getting caught again. But given the state of the secondary market, we are not at risk of having those sub prime loans offered any time soon. By then the Fed may be willing to offer looser standards again.



2. "Creditors and mortgage brokers cannot coerce a real estate appraiser to misstate a home's value". I am pretty sure that is RESPA violation today. That is also incredibly vague, and probably should say mortgage brokers AND BANKERS. I suppose it is good to get a refresher on the basics of real estate ethics every once in a while.



3. Speaking of today... the changes are due to go into effect October 1st 2009?!?! 2009? Really? Maybe that is a typo, and they really meant 2008. I hope so.

As we know, the best way to make sure you are not getting ripped off is to shop around, or better yet us an Upfront Mortgage broker.