Chapter 14 Fair Lending and Consumer Protection

Also has lower cost thresholds intended to include

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Also has lower cost thresholds. Intended to include all subprime loans and even some Alt-A loans. Higher-priced loans
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Federal Predatory Lending Law Effective October, 2009, both higher-priced and high-cost loans are subject to new consumer protection requirements. Lender can’t make loan without considering verified income and assets during underwriting. If loan has variable payments during first four years, can’t charge prepayment penalty. For other loans, prepayment penalty can’t go beyond first two years. Higher-priced and high-cost loans
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Federal Predatory Lending Law Effective April, 2010, lenders will also be required to establish an escrow (impound) account for first-lien loans, and require the borrower to make deposits for property taxes and insurance. The goal of this provision is to reduce loan defaults. Borrowers may be able to request a waiver of this requirement after the first year. Higher-priced and high-cost loans
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Federal Predatory Lending Law In addition to the new rules, HOEPA’s high-cost loans continue to be subject to several existing rules: if loan term is less than 5 years, loan can’t be structured so that balloon payment will be necessary; negative amortization isn’t allowed; and interest rate can’t be raised because of default. Rules that apply only to high-cost loans
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Predatory Lending Laws In addition to the protections included in TILA, a majority of states now have their own predatory lending laws, and others are in the process of adopting them. State laws
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State Predatory Lending Laws Coverage and provisions of state laws vary. I Some apply only to home equity and refinance loans. I Others also apply to purchase loans. Coverage
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State Predatory Lending Laws One of the most recent concerns addressed by state laws is the need for consumer protection during the loan modification process, after a borrower defaults (or is about to default) on a home loan. Protection for distressed borrowers
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State Predatory Lending Laws State license laws that regulate mortgage brokers, appraisers, and real estate agents are also applied to suspend or revoke licenses of those involved in predatory lending schemes. License laws
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Summary Predatory Lending i Steering i Fee packing i Equity stripping i Loan flipping i Property flipping i HOEPA i High-cost loan i Higher-priced loan
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