Today the Fed has unveiled some of the rules it deems favorable to protect the consumers when taking a loan. Even with the planned consumer financial protection agency proposed by the Obama administration, the central bank decided to move ahead and try to save itself from an embarrassment it faced (and still faces) after failing to prevent mortgage loan practices by some institutions that effectively led to this debacle.
The proposal from the Fed included a statement from Chairman Bernanke, which says:
“Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances. It is often said that a home is a family’s most important asset, and it is the Federal Reserve’s responsibility to see that borrowers receive the information they need to protect that asset.”
Under the proposal, lenders would be required to show borrowers how their APRs compare to those with better credit, improve the disclosure of the APR to better cover costs that the borrowers perhaps wouldn’t otherwise see, as well as informing them how their payments might changed given an adjustable-rate mortgage.
With regard to home equity line of credit or HELOCs, lenders would be required to submit a one-page summary of disclosures of information and risks that are currently being distributed to borrowers as a pile of papers.
Jump to the official Fed release HERE.