The Federal Reserve Board on Monday proposed enhanced consumer protections and disclosures for home mortgage transactions. The proposal includes significant changes to Regulation Z (Truth in Lending Act) and represents the second phase of the board's review and update of the mortgage lending rules in the regulation.
According to the board, the latest proposal would do the following:
- improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information;
- prohibit certain unfair practices in the sale of financial products with reverse mortgages;
- improve the disclosures that explain a consumer's right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and
- ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.
Under the proposed rules, consumers would receive disclosures on or with the application form, using simple language to highlight the basic features and risks of reverse mortgages. Shortly after filling out the application, consumers would receive transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered.
The board's rules would additionally prohibit credits from conditioning a reverse mortgage on the consumer's purchase of another financial or insurance product; and require that a consumer receive counseling about reverse mortgages before a creditor can impose nonrefundable fees for a reverse mortgage or close the loan.Â
SOURCE: Federal Reserve Board