CFPB Amends Guidelines For Providing Lists of Housing Counseling Organizations

ChecklistThe Consumer Financial Protection Bureau earlier this week issued a final interpretive rule on how lenders are to provide mortgage applicants with a list of local homeownership counseling organizations, amending its 2013 guidelines.

Wednesday’s update spells out how lenders are to provide mortgage applicants with homeownership lists of HUD-approved housing counseling agencies, homeownership counseling lists, the use of a consumer’s mailing address to provide the list, and high-cost mortgage counseling qualifications. Part of the last is an update of the bureau’s anti-steering measure designed to keep unwary borrowers from being directed towards predatory lenders.

Housing counselors‒‒which can be the lenders themselves‒‒can provide advice on buying a home, renting, defaults, foreclosures, and credit issues at little or no cost to consumers. The Dodd-Frank Act of 2010 included a requirement that mortgage lenders provide applicants with a list of local housing counselors, which consumers are to receive shortly after they apply for a mortgage. Lenders comply with this requirement when they provide a list of ten HUD-approved housing counseling agencies.

Lenders may counsel applicants by using CFPB-developed housing counseling lists, available through an online CFPB tool. Lenders may also create their own lists using the same Department of Housing and Urban Development data that the CFPB uses to build its lists.

“Buying a home is often the largest financial decision in a consumer’s lifetime, and we want to ensure that consumers can access the independent and informed advice they deserve before making that decision,” said CFPB director Richard Cordray. “Housing counselors are a crucial source of that helpful advice.”

The changes to the bureau’s counseling rules come after a January report that found that nearly half of all mortgage seekersdo not shop around for mortgages. This, the bureau stated, is a major disservice to borrowers, who could save thousands if only they knew to look around, and where to look. In fact, the CFPB estimates that over the first five years of their mortgage, a borrower with a 4.0 percent 30-year fixed rate could save up to $3,500 in mortgage payments over one with a 4.5 percent rate.

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