#5) The new rules ensure that consumers receive “good faith estimates” of the costs of a mortgage earlier in the application process and that the disclosures better explain the costs and terms of a loan. The disclosures will cover areas such as the potential for mortgage payments to increase, any penalty for paying off the loan early, and any fees paid by the lender to a mortgage broker for bringing in business.

(a) Lenders will still be required to provide early disclosures to consumers for loans to purchase a primary residence, but now they also must do so for mortgage refinancings, home equity loans (but not home equity lines of credit) and mortgages used to purchase any home, such as a vacation home or second home.
(b) At least seven business days must pass between when a lender delivers or mails the early disclosures to a consumer and the mortgage loan closing.
(c) If the Annual Percentage Rate (APR) which is the cost of the loan expressed as a yearly rate, including interest and certain fees increases by a certain margin above what was previously disclosed, the consumer must receive a corrected disclosure at least three business days before the loan closing.
(d) A lender cannot charge any fee in connection with an application until after the consumer has received the early disclosures, except for the fee to obtain the consumer’s credit report.

#6) Lenders and mortgage brokers are required to use the same form to provide good faith estimates of settlement costs and disclosures of key loan terms. The rules also include changes to HUD’s “uniform settlement statement” ( HUD-1 form) that will make it easier for consumers to compare the estimated costs to the actual costs charged. The new rules limit how much actual costs can increase above the estimates.

#7) The rules will ban several advertising practices that the agency found to be deceptive or misleading:
(a) Prohibits any advertisement from indicating that a rate or payment is “fixed” when it can change;

(b) For home equity lines of credit, if an advertisement mentions a minimum payment — which may result in a large, lump-sum “balloon payment” due at the end of the loan term — the ad must state that fact with equal prominence and in close proximity to the minimum payment information;

(c) And requires advertisements to show all interest rates or payment amounts with equal prominence and in close proximity to any low promotional or “teaser” rate or payment.
Before committing to a mortgage that is too complex to understand, you should  seek help from an attorney or a trained, reputable housing counselor.

You can find a counselor at NeighborWorks America or by calling 1-888-995-HOPE (4673). For a referral to a local HUD-certified counseling agency, visit www.hud.gov or call 1-800-569-4287.

Shopping for a mortgage takes time and effort. Choosing the wrong mortgage can be very costly. It could lead to the loss of your home if you can’t afford the payments. But new federal consumer protections will increase the likelihood of finding a fair mortgage that you can afford for many years.

The new rules recognize that disclosures alone can not always protect mortgage borrowers from the harm caused by unfair and abusive lending practices.

Rules # 1 through #3 and #7 went into effect on October 1, 2009. Rules #4 and  #5 went into effect on July 30, 2009. Rule #6 will go into effect on January 1, 2010.

#1) For home mortgage loans (not including home equity lines of credit), mortgage lenders and brokers are prohibited from coercing or encouraging real estate appraisers to misrepresent the value of a home. This is intended to ensure the integrity and accuracy of an appraisal, so that a consumer is not overpaying for a home or borrowing more money than the home is worth.

#2) Mortgage loan servicers (companies that collect mortgage payments and perform other duties for lenders) are prohibited from engaging in these unfair actions: (a) failing to credit a loan payment on the date it is received; and (b) deducting a late-payment fee from a loan payment without informing the borrower and thereby creating a shortage that triggers additional fees for the borrower, month after month, even when the next loan payments arrive on time.

#3) For mortgages with a relatively high interest rate typically because the applicant is considered a subprime credit risk, the new rules contain these protections: (a)a lender is prohibited from making a higher-priced loan without regard to a borrower’s ability to repay from income and assets other than the home’s value; (b)lenders of higher-priced mortgages are required to verify a loan applicant’s income and assets using reliable, third-party documents and not based on the word of the borrower.; and (c)in certain cases, the lender cannot impose a prepayment penalty if the borrower pays a loan off early.

#4) The U.S. Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the SAFE Act) requires mortgage loan originators — including loan officers at financial institutions and independent mortgage brokers — to register with the government and enter information about their background and disciplinary history into a central database that consumers can access. The SAFE Act is intended to enhance consumer protections and reduce fraud in the residential mortgage industry.

Before committing to a mortgage that is too complex to understand, you should  seek help from an attorney or a trained, reputable housing counselor. You can find a counselor at NeighborWorks America (www.nw.org) or by calling 1-888-995-HOPE (4673). For a referral to a local HUD-certified counseling agency, visit www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call 1-800-569-4287.