3 Mortgage lending laws introduced from 2010

Since the subprime crisis, various mortgage laws have come into practice in order to avoid another economic meltdown of similar magnitude. If you are a mortgage lender you need to follow these laws in order to offer a mortgage. Some of the conditions these laws aim at achieving are listed below.

1.    Verification of payback ability – A mortgage lender should not provide or arrange for a residential mortgage loan without verifying whether or not the borrower would be able to pay back the loan along with its various aspects like interest payment, real estate taxes, homeowner’s insurance, assessments and mortgage insurance premiums as applicable.

2.    Avoiding foreclosure – A mortgage lender cannot make or assist in making any residential mortgage loan in some particular conditions. These include all evidences which suggest that the borrower will be unable to pay back the loan and thus face a foreclosure, that is, the residential mortgage broker will obtain the title to the property.

3.    Obtaining suitable mortgage – A mortgage lender is forbidden to offer a mortgage loan of lower investment grade if the credit score or any such comparable data of the borrower indicates that the borrower qualifies for a mortgage loan of higher investment grade from the mortgage lender. The only condition under which this can be done is if the borrower is informed that he is qualified to take a higher investment mortgage loan at lower interest rate, or lower discount point or both and agrees on paper to receive the lower investment grade loan.

These mortgage lending laws aim at achieving stability in the mortgage market and caters to the needs of both lenders and borrowers.