Understanding Mortgages

Let’s face it, whether you’re a buyer, a seller or an agent – mortgages can be a confusing part of buying or selling a home.

This confusion is one of the biggest reasons why it generally takes a team of workers to get through the sale or purchase of a home.

While your agent is obviously well-versed and knows about mortgages they are still all kinds of nuances that only a mortgage professional will be aware of.

This is the primary reason we utilize professional mortgage brokers to help us get through the process and understand what’s going on. The government has decided to take initiative to reduce some of the uncertainty that makes mortgages so confusing and has proposed a new set of rules that will simplify things for everyone.

The Timing

These new rules were created by the U.S. Consumer Financial Protection Bureau and they are expected to be proposed this summer. Finalization of these rules is expected to happen as of January 2013, making mortgages easier for consumers and anyone else involved in the financing process to understand.

What Should Happen

With the implementation of these new rules things like mortgage points and fees will not only be more clearly explained and exposed to the consumer but make it easier to comparison shop. The intention of the CFPB according to Director Richard Cordray is, “to bring greater transparency to the market so consumers can clearly see their options and choose the loan that is right for them.”

The new rules will require mortgage lenders to offer a no discount point loan option. This means that it will be easier for buyers to compare offers amongst different lenders. Lenders will no longer be able to charge what we now known as points that vary according to the size of the loan either. The CFPB will allow only a flat rate fee or as the lenders call it origination fees.

Along with making points and fees easier and more evident to the buyer, the CFPB is also proposing placing regulations on the qualifications that are necessary for brokers and loan officers to attain.

Why The Changes?

The CFPB is concerned that mortgage loan originators have actually created a spider’s web of confusion that consists of fees and incentives which in the end translate to less than favorable terms for the buyer. They want these changes to make how the mortgage companies handle your mortgage more transparent and obvious to you, the consumer.

While the CFPB had attempted to help consumers with the Truth In Lending Act, which became effective in April 2011, they realized that these particular aspects of lending hadn’t been addressed. Too many consumers were still walking away confused. These new rules will help to alleviate any conflict of interest along with making the structure and terms of the mortgage easier to understand and more transparent.

End Result

The end result of these new rules should help the consumer and anyone else that is a part of the transaction feel more comfortable and in control. It should help to alleviate any originators that may not necessarily have the best interest of the consumer at heart and keep them from being able to hide behind certain terms and fees. This is definitely a plus for the consumer when it comes to finding and comparing mortgage providers.