On the heels of its qualified mortgage and ability-to-repay rule making announcements, the Consumer Financial Protection Bureau is ramping up protections for high-cost mortgages as well.
Through final rules issued Thursday to boost consumer protections for high-cost mortgage loans, certain loans will require housing counseling and five-year minimum escrow accounts that previously did not have those requirements.
According to the final rule, reverse mortgages do not fall under the definition.
“Addressing problems in the mortgage market is critical to helping our economy recover,” said CFPB Director Richard Cordray. “Today’s changes will better help consumers to understand the real costs of owning a home while protecting them from harmful practices that can trap them into high-cost mortgages.”
The changes amend the Home Ownership and Equity Protection Act as mandated by Dodd-Frank.
Under the new protections, those loans that qualify as high-cost include bans on potentially risky features such as balloon payments (with some exceptions) as well as bans and limits on certain fees and practices. The requirements also include the housing counseling and escrow stipulations.
The rule will go into effect January 10, 2014.
Written by Elizabeth Ecker