State the administrative agency which controls the regulation. Explain why this agency and your proposed regulation interest you (briefly). Will this proposed regulation affect you or the business in which you are working? If so, how?
The regulation that I have chosen is the amendment in Regulation X (Real Estate Settlement Procedures Act) and Regulation Z (Truth in Lending) to establish new disclosure requirements and forms in Regulation Z for most closed-end consumer credit transactions secured by real property. This regulation is controlled by Bureau of Consumer Financial Protection. The role of Consumer Financial Protection Bureau (CFPB) is to provide consumers the information related to the terms of their agreements with financial companies during their application for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
(http://www.consumerfinance.gov/the-bureau/). The mortgage market is the single largest market for consumer financial products and services in the United States, with approximately $10.3 trillion in loans outstanding. During the last decade, the market went through an unprecedented cycle of expansion and contraction that was fuelled in part by the securitization of mortgages and creation of increasingly sophisticated derivative products. This led to the collapse of financial system in 2008 and sparked the most severe recession in the United States. Four years later, home prices are down 35 percent from peak to trough on a national basis. The fall in housing prices is estimated to have resulted in about $7 trillion in household wealth losses. In the aftermath of 2008-2009 home loan mortgage crises, it has become even more paramount to regulate the housing and real estate loan markets and transactions so as to provide protection to the end customers. The role of this agency is very important as it helps sort out questions and complaints on mortgages, credit cards, student loans and more.
Describe the proposal/change.
The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinancing and home equity mortgage loans with high interest rates. In response to the recent mortgage crisis, Congress through the Dodd-Frank Act expanded HOEPA to apply to more types of mortgage transactions, including purchasing money mortgage loans and home-equity line of credit. Under the proposed rule, most types of mortgage loans secured by a consumer’s principal dwelling, including purchase money mortgage loans, refinances, closed-end home-equity loans and open end credit plans are potentially subject to HOEPA coverage. The proposed rule would implement new Dodd-Frank Act restrictions and requirements concerning loan terms and origination practices for high-cost mortgages. Under this rule, HOEPA protections would be triggered where a loan’s annual percentage rate (APR) exceeds the average prime offer rate by 6.5 percentage points for most first-lien mortgages and 8.5 percentage points for subordinate-lien mortgages or loan’s points and fees exceed 5 percent of the total loan amount, or a higher threshold for loans below $20,000. Balloon payments would largely be banned and creditors would be prohibited from charging prepayment penalties and financing points and fees. Late fees would be restricted to 4 % of the payment that is past due, fees for providing payoff statements would be restricted, and fees for loan modification or loan deferral would be banned. Creditors and mortgage brokers would be prohibited from recommending or encouraging a consumer to default on a loan or debt to be refinanced by a high cost mortgage.
Write the public comment that you would submit to this proposal. If the proposed regulation deadline has already passed, write the comment you would have submitted. Explain briefly what you wish to accomplish with your comment.
I am in favour of these proposed rules and regulations. I would like to suggest that HOEPA protections should be triggered where a loan’s annual percentage rate (APR) exceeds the average prime offer rate by 5 percentage points for most first-lien mortgages and 6 percentage points for subordinate-lien mortgages. And the reason being is because it will also bring the medium cost mortgage rates offered by banks under the scrutiny of HOEPA which will protect the end customers. Also, the Late fees should be restricted to 3 % of the payment that is past due as there are many customers today falling in the bucket of late payment and charging a hefty rate of 4% would be too burdensome for the end customers. Obtaining loan pricing data under HOEPA will help regulatory agencies better understand the mortgage market.
Provide the “deadline” by which the public comment must be made. (If the date has already passed, please provide when the deadline was.
Comment Due Date was November 06 2012, at 11:59 PM Eastern Standard Time.