| As members of the House and Senate begin to duke | | | | be restricted completely on adjustable-rate, subprime |
| it out in an attempt get a final bill on President Obama's | | | | or other loans that are based on uncertain |
| desk before the July 4th break, many Americans are | | | | characteristics. The penalties for paying off a loan |
| left wondering what this bill would mean for them. The | | | | earlier than scheduled will be limited to a maximum of |
| need for financial reform partially stems from the | | | | three years and 3% of the outstanding loan balance. |
| subprime mortgage crisis, however few people are | | | | Most legitimate lenders do not charge borrowers a |
| aware of exactly what impact financial reform could | | | | prepayment penalty. |
| have on mortgages. While the House & Senate work | | | | No bonus for putting people in higher rates |
| to merge their versions of the bill, it's important to be | | | | Some less credible mortgage brokers and loan |
| aware of the details that could have an impact on | | | | originators have steered home buyers to more |
| your mortgage. | | | | expensive loans, regardless of if they qualify for a |
| No more "no doc" loans | | | | lower rate. Both the House and Senate versions of |
| Both bills prohibit issuing loans to borrowers without | | | | the bill prohibit any financial incentives for putting |
| verifying that the person will have the means to repay. | | | | borrowers in loans with higher interest rates than they |
| Lenders will be required to document income and | | | | qualify for. Currently, both versions of the bill would |
| confirm by any possible means that the borrower will | | | | make this practice illegal. |
| be able to repay their loan. Many lenders have | | | | It's still too early to tell exactly what measures are |
| stopped issuing "no doc" loans, but the bill, if passed, | | | | going to make it into the final version of the bill. The |
| would legally prohibit these types of loans. | | | | good news is that most trusted mortgage lenders |
| No penalty for prepayment | | | | avoid many of these practices without being required |
| It used to be that when homeowners tried to refinance | | | | to do so by law. That's why it's more important now |
| or pay their mortgage off early, they were hit with | | | | than ever to work with a lender you trust when you |
| hefty penalties and increased payments. Both bills | | | | are applying for a home loan or a mortgage refinance. |
| would begin to restrict these penalties, and they would | | | | |