Alert August 24, 2010

FRB Proposes Additional Consumer Protections for Mortgage Loan Transactions

The FRB proposed amendments to Regulation Z which would provide additional consumer protections and disclosures for mortgage loan transactions. The proposal would (1) improve disclosures for reverse mortgage loans and seek to ensure that reverse mortgage loan advertising is accurate and balanced, (2) prohibit certain practices in the sale of reverse mortgage loans, such as conditioning the sale of the loan on the consumer's purchase of other financial or insurance products, (3) improve disclosures explaining a consumer's right to rescind certain mortgage transactions, and (4) require new disclosures when the key terms of an existing closed-end mortgage loan are modified. The proposal would also amend certain rules pertaining to all mortgage loans by (a) allowing consumers to obtain a refund of fees if they withdraw a loan application within three days of receiving disclosures and (b) requiring that, if the consumer requests information about the owner of the loan, the servicer must provide the information within a reasonable time. Comments on the proposal are due 90 days from publication in the Federal Register. Click here for the proposal.