Written by Biloxi
The Federal Reserve announced that it would not finalize three disclosure rules under Regulation Z before transferring rulemaking authority to the Consumer Financial Protection Bureau. The Consumer Financial Protection Bureau which is part of the Dodd-Frank financial reform bill will open its doors in July 21, 2011. Reg Z is the regulatory statute implements the Truth in Lending Act. Under the Truth in Lending Act, the Fed was granted the authority to write new rules on how terms in a mortgage loan would be disclosed to consumers. Here is more on Federal Reserve's proposals which caused a public outcry:
Two of the proposals were issued in August 2009 and the other in September. Within the three proposals are rules on how, among other things, lenders explain to consumers their rights to rescind certain loans. The rule would have also clarified the responsibilities of the creditor if the consumer did. The September rule also includes changes to how terms for reverse mortgages and modifications are disclosed, and detailed changes to how these products are advertised and sold.
The Fed received more than 5,000 comments from industry players regarding these delayed rules.
Under the Federal Reserve proposed rule, the borrower was required to pay off the remaining balance of the loan before the lender is required to give up the security interest. Currently, a borrower has the right to rescind a mortgage within three years of closing if the proper disclosures weren't made. the public and many advocates argued that the Federal Reserve proposal would eliminate a powerful defense for borrowers against foreclosure and providing a disincentive for servicers to engage in loss mitigation to save the borrower home from foreclosure.
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