Mortgage Refinancing Simplified By Feds

KSBW, CA

New Rules To Help Homeowners Understand Terms Better

Washington - Getting a mortgage or refinancing a home should be easier to understand in the future, with some new simplified rules and documents unveiled Wednesday by the federal government.

Federal officials said a lot of people just didn't understand the terms of mortgage loans they signed up for and that that has a lot to do with the current mortgage crisis. They said these new rules should help, "Will allow borrowers to shop more effectively for the best loan, and ensure that the loan they get is the loan that they bargained for."

For example: there's a new standard form for good faith estimates lenders are legally required to give prospective homebuyers.

Right on page one lenders will have to state in black and white: will the loan's interest rate rise? How much? Can the balance rise? And is there a balloon payment?

"There are people who are not disclosing things that they should, and I think this document does a good job of requiring that disclosure," said Alan Tayman, with C&F Mortgage.

Closing costs must be disclosed and federal officials estimate the form could save borrowers some $700 at those costs. But not everyone is satisfied.

The Center for Responsible Lending said, "A standardized good faith estimate is a step in the right direction. But it's one small step and doesn't deal with a lot of larger issues that need to be dealt with."

For one thing, the center said it believes the new forms don't fully explain incentives or kickbacks some brokers might get from lenders.

But officials said the new rules will help keep people out of loans and homes they can't afford. One broker said borrowers could use the help.

"I think they understand a lot more now than they did three years ago," Tayman said. "But I still think there's a lot of room for improvement."

The new disclosure forms won't be available immediately. They aren't required until Jan. 1, 2010.

The program has taken a while. In fact, the government originally had the idea to simplify the disclosure forms more than six years ago but they said pressure from the mortgage industry slowed them down. The Department of Housing and Urban Development secretary said had these changes come sooner they would have reduced the impact of the mortgage crisis.

The new disclosure rules are an overhaul of a 1974 law requiring lenders to give a so-called "good faith estimates" of mortgage costs. Officials said it is the first reforms in those rules in over 30 years.