New Laws Could Significantly Change Mortgages

Lawmakers are finding themselves under increasing pressure from the public to take action to reform the mortgage markets amid the biggest housing problem in U.S. history. There are at least two ideas on the table at the capitol that promise to have widespread consequences if passed for all lenders and financiers involved with mortgages - one of the largest financial markets in the world.

The first proposed change would restrict a method of payment to mortgage brokers that rewards placing borrowers in high-rate loans - sometimes without their knowledge. Obviously, this is a law that may be beneficial as it would better align the goals and incentives or mortgage brokers with consumers rather than the companies they work for since clearly the companies are not capable overseeing their own customers. Similar small regulations like these have protected the bnaks of the U.S. without causing any major problems.

The second proposed change would have much larger consequences. It would involve transferring legal liability for any fraud in the original mortgage to any future purchaser of the loan. Under current law, if a mortgage broker or or lender commits fraud and the loan is subsequently sold to an investor group - which is common - the investor that ends up with the loan cannot be held liable for any fraud. The proposed change would shift the liability and likely increase the risk premiums put on the loans, which would mean higher rates and higher standards for borrowers.

Currently, both of these proposals are nothing more than talk, but the ramifications if passed could be very significant, which makes this situation one that is definitely worth watching!

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