According to the National Association of Realtors®, the Fed. Reserve adopted new rules designed to protect homebuyers from the kind of loans that drove many into foreclosure. The new rules apply to all lenders (not just to banks supervised by the Fed) and most are expected to take effect Oct.1, 2009. Escrow requirements won’t go into effect until April 1, 2010.
Here are the new requirements:
- Prevent loans made without documenting borrower’s income
- Require lenders to escrow money to pay taxes and insurance for risky borrowers
- Limit and/or ban prepayment penalties
- Prohibit lenders from making a loan without considering a borrower's ability to repay a home loan from sources other than the home's value
- Require mortgage advertising to contain information about rates, monthly payments and other features of the loan
- Insist lenders credit a mortgage payment to a home owner’s account on the day it is received
- Forbid mortgage brokers and others from "coercing or encouraging" an appraiser to misrepresent the value of a home