As of January 10, 2013, the CFPB (Consumer Financial Protection Bureau) amended Regulation Z, more commonly known as the Truth in Lending Act (TILA).
The amendment to regulation Z, called the “Ability to Repay” rule, requires creditors to make a reasonable determination whether a consumer is able to repay a loan before proceeding with any transaction.
This new rule will protect consumers from irresponsible and possibly fraudulent mortgage lending such as “no doc” and “interest only” loans which contributed to the housing collapse in 2008 and put many homeowners in foreclosure.
Finally, the CFPB proposed a new category of loans called “Qualified Mortgages”, which are mortgages where borrowers are highly protected from deceptive practices.
These loans exclude programs like negative-amortization, where the monthly payment does not cover the accrued interest rate and the loan balance actually increases every single month.
Consumers should be able to trust the American dream of home ownership without worrying about losing their homes, getting buried in debt, or damaging their credit.
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