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Congress recently passed the most comprehensive piece of financial regulation legislation since the Great Depression, The Dodd-Frank Wall Street Reform and Consumer Protection Act. LGBT buyers and sellers will likely begin to feel the widespread influence of these new laws soon. That’s because many of the provisions within the gigantic package of rules will have a significant impact upon the real estate market and the residential mortgage industry..
The 2,300 page bill was, after all, first inspired by the collapse of the real estate bubble and paralysis within the mortgage lending sector in the wake of the housing and mortgage crisis. At that time many Americans owned properties they could not afford that had wildly inflated values artificially propped up by exotic and toxic loans. Since then millions lost their homes, and this new bill pledges to prevent that from ever happening again..
Many homeowners found themselves trapped in inappropriate mortgages that got more expensive over time, and millions of LGBT borrowers watched the monthly payments on their volatile adjustable rate mortgages abruptly double or triple without warning. Mortgages were also being feverishly bought and sold as high-yield investments on Wall Street. The process of packaging loans into big, overblown bundles provided get-rich-quick opportunities to large investment corporations who passed them off like hot potatoes for fast profits. But the financial scheme – or scam – soon imploded and set off a catastrophic ripple effect that adversely affected economies all over the world. Millions of LGBT homeowners faced imminent foreclosure but it was impossible for many of them to qualify for the safer and more reasonable loans they needed in order to avoid losing their homes..
So the main focus of the bill is increased consumer protection, greater financial industry oversight and transparency, and tighter regulation of mortgage products. Those areas of emphasis will provide new safeguards that are long overdue for homeowners, home buyers, and other consumers..
The bill sets stricter limits, for example, on the use of such sneaky devices as prepayment penalties charged to borrowers who pay off their mortgages ahead of time. When a prepayment clause is inserted into the fine print of a loan agreement it allows the lender to impose fines or fees if the homeowner decides to pay off their debt early. Those fees are usually substantial and they can effectively counteract the earnest efforts of borrowers to reduce debt and save or manage their money. A strategy such as refinancing to capture a cheaper interest rate or shift into a safer and more sensible loan, for example, can be completely undermined by a stiff prepayment penalty. So LGBT borrowers can now safely borrow without fear of being hamstrung by those kinds of hidden traps and built-in triggers..
Another important provision within the bill demands greater transparency regarding financial compensation for loan officers and mortgage brokers. During the years leading up to the mortgage crisis many loan companies paid hefty bonuses and sales incentives to those who sold more expensive loans. These payments, which in some cases amounted to illegal kickbacks, encouraged loan officers to push costlier mortgage products on unsuspecting customers without regard to whether or not those were appropriate or manageable. But Congress has curbed that practice by making it unlawful to pay a loan officer or broker a bonus for intentionally steering customers into a particular loan product or interest rate..
Licensed professional appraisers have also complained for years that they have been routinely pressured by banks and mortgage lenders to artificially manipulate home values in order to facilitate lender profits. Those who refused to cooperate in this kind of unethical behavior often found themselves blacklisted. But the new regulations put a legal firewall between appraisers and lenders by requiring that mortgage companies not use in-house appraisers and that third-party appraisal management companies register with state regulatory agencies..
While the new regulations are good for the consumer, they also mean that underwriting of mortgage loans is now at a much higher standard. Borrowers should be prepared to present more documentation, offer larger down payments, and demonstrate a relatively low level of debt as a ratio of net income..
But tighter standards should not discourage LGBT buyers needing an affordable mortgage or homeowners looking to refinance. Interest rates on fixed-rate conventional loans are currently at historical lows that offer rare bargains, for example, which is great for consumers. Many excellent and innovative FHA-insured loans also offer highly competitive interest rates, substantially lower down payments, and affordable closing costs. Plus there are extremely affordable VA loans available to any eligible LGBT borrower who is a military veteran in good standing..
The historical financial reforms will ultimately bolster overall consumer confidence to strengthen the real estate sector and improve lending practices. That’s why most real estate and mortgage professionals hail the new rules as a step in the right direction for restoring faith and integrity while ensuring fairness and consumer protection..
To find real estate and mortgage professionals dedicated to active support of the LGBT community, visit the websites www.GayMortgageLoans.com and www.GayRealEstate.com, or call toll free 1-888-420-MOVE (6683)..