AJ Consumer Watch News

Federal Reserves New Rules Won't Protect Consumers

LOS ANGELES, July 14 PRNewswire — AJ Consumer Watch was founded by Alan Jablonski, a prominent Southern California consumer rights attorney and California mortgage broker. His soon to be published book "Successfully Navigating the Mortgage Maze" (due out in late July) gives consumers a complete understanding of the loan process and the traps set for unwary consumers by predatory lenders.

The new rules approved by the Federal Reserve fail to address the root problems consumers face when attempting to understand their mortgage and avoid foreclosure due to predatory lending practices. These rules are designed to restore confidence in the investment community, but do little to protect homeowners and home buyers from current and past lending practices that led to the collapse of the housing market, lack of confidence in the financial system and the continuing failure of the banking industry.

"Homeowners will not be helped by the new rules approved by the Federal Reserve, nor will home buyers be protected from the predatory lending practices that have yet to be addressed by the Fed or Congress," Jablonski said. "The requirement that lenders review the consumers ability to repay a loan during the adjustable period is misleading, currently indexes are historically low and these rates will be higher in a year or two, so the actual payments will be greater than the calculation required under the new regulations."

The new rules focus on the most blatant practice of approving loans for consumers who can not afford the payments after the loan moves to its adjustable period. While the Federal Reserve will now require lenders to consider the consumers ability to repay the loan, it neglects to consider the lending industry practices designed to entice home buyers into purchasing homes that they can not afford because the loopholes left in place will invite further abuses and misrepresentations by the predators within the mortgage industry. A payment schedule can still be based on unrealistic interest rates and lenders can continue to hide the rebates they receive for raising a consumer's interest rate.

The regulation changes regarding prepayment penalties will not affect the vast majority of homeowners and buyers because the sub-prime market is currently correcting itself by limiting the access to high loan to value (LTV) products which most sub-prime borrowers now face due to the devaluation that has occurred in the housing market. "Most 'A' paper borrowers should not and do not elect to receive a prepayment penalty since the savings obtained does not affect their interest rate or costs significantly," Jablonski responded.

Jablonski stated, "There must be comprehensive changes to the laws that would require full disclosure of the costs and terms of loans, so that homeowners and buyers can fully understand the true cost of their home loan and avoid problems in the near future." He continued, "This is too little too late for those facing foreclosure."

SOURCE AJ Consumer Watch

Send this news item to a friend.

Print This Page