Financial Services Reform: What’s Ahead For Senior Housing?

United State Capital - Financial Reform Will the consumer protections proposed by the new financial services reform bill make a difference for seniors and Baby Boomers and their housing decisions and personal finances?  Or has too much pain been inflicted already?  Lawmakers expect to deliver the final version of the Dodd-Frank Wall Street Reform and Consumer Protection Act to President Obama prior to the 4th of July for his signature.  The bill provides regulatory framework for both Wall Street and consumer finance but the charge for consumer advocacy reflects a shift by lawmakers aiming to provide protection on unparalleled levels.  The bill focuses heavily on the consumer finance area by focusing on mortgage lending, credit cards and pay day lending practices and creates a new independent watchdog called the Consumer Financial Protection Bureau (CFPB), housed at the Federal Reserve.  The CFPB will have the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.  The CFPB will create an new Office of Financial Literacy to help educate consumers and create a national consumer complaint hotline so consumers will have, for the first time, a single toll-free number to report problems with financial products and services.

  • Housing Counseling: Establishes an Office of Housing Counseling within HUD to boost homeownership and rental housing counseling.
  • Monitor Personal Financial Rating: Allows consumers free access to their credit score if their score negatively affects them in a financial transaction or a hiring decision. Gives consumers access to credit score disclosures as part of an adverse action and risk-based pricing notice.
  • Reverse Mortgages: CFPB is required to conduct a study on reverse mortgages to determine any deceptive or abusive practices within one year.  The study would also determine whether suitability standards are necessary, as well as safeguards to protect consumers from being sold reverse mortgages to fund inappropriate annuities, investments and other financial products. The bureau also has the authority to issue regulations, orders, or guidance that apply to reverse mortgages prior to the completion of the study.
  • Emergency Mortgage Relief: Building on a successful Pennsylvania program, provides $1 billion for bridge loans to qualified unemployed homeowners with reasonable prospects for reemployment to help cover mortgage payments until they are reemployed.
  • Require Lenders Ensure a Borrower’s Ability to Repay: Establishes a simple federal standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold.

  • Prohibit Unfair Lending Practices: Prohibits the financial incentives for subprime loans that encourage lenders to steer borrowers into more costly loans, including the bonuses known as "yield spread premiums" that lenders pay to brokers to inflate the cost of loans. Prohibits pre-payment penalties that trapped so many borrowers into unaffordable loans.
  • Establishes Penalties for Irresponsible Lending: Lenders and mortgage brokers who don’t comply with new standards will be held accountable by consumers for as high as three-years of interest payments and damages plus attorney’s fees (if any). Protects borrowers against foreclosure for violations of these standards.
  • Expands Consumer Protections for High-Cost Mortgages: Expands the protections available under federal rules on high-cost loans — lowering the interest rate and the points and fee triggers that define high cost loans.
  • Requires Additional Disclosures for Consumers on Mortgages: Lenders must disclose the maximum a consumer could pay on a variable rate mortgage, with a warning that payments will vary based on interest rate changes
  • Neighborhood Stabilization Program: Provides $1 billion to States and localities to combat the ugly impact on neighborhood of the foreclosure crisis — such as falling property values and increased crime – by rehabilitating, redeveloping, and reusing abandoned and foreclosed properties.
  • Foreclosure Legal Assistance. Authorizes a HUD administered program for making grants to provide foreclosure legal assistance to low- and moderate-income homeowners and tenants related to home ownership preservation, home foreclosure prevention, and tenancy associated with home foreclosure.

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