Consumer Financial Services Alert - December 29, 2009

The FFIEC released proposed guidance on reverse mortgage products for comment. The guidance covers the compliance and reputation risks raised by reverse mortgage lending. The proposal addresses the general features of reverse mortgage products, relevant legal requirements and consumer protection issues. The proposal focuses on the need for banks to provide clear and balanced information to consumers about the risks and benefits of these products. According to the proposal, this information should be provided while consumers are making decisions about these products and should address the specific matters listed in the guidance, including informing consumers of available alternatives to reverse mortgages. The proposal also states that banks should require that consumers receive independent counseling and take steps to avoid any appearance of a conflict of interest. Comments must be received 60 days from publication in the Federal Register. Click here for the proposal.

HUD released a revised settlement cost booklet in anticipation of the new Real Estate and Settlement Procedures Act rules set to take effect January 1, 2010. The handbook is meant to apply to purchase-money transactions, not to refinancings. The booklet must be provided within three days of receiving an application along with the new GFE. Click here for the booklet.

The FRB and FTC issued a final rule that generally requires creditors to provide a notice when, based on a credit report, they make a loan with less favorable terms than they would give to other consumers.  Consumers who receive this risk-based pricing notice will be able to obtain a free credit report to check the accuracy of the report.  The rule provides creditors with several methods for determining which consumers must receive risk-based pricing notices.  As an alternative to providing risk-based pricing notices, the rule permit creditors to provide consumers who apply for credit with a free credit score and information about their score.  The rule implements Section 311 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act. The rule is effective January 1, 2011. Click here for the rule.