Biggest shake-up in home loan rules in 30 years

photo credit: woodleywonderworks

US government officials have unveiled one of the biggest shake-ups in home loan rules in 30 years which could see some property investment novices saving hundreds of dollars.

The Department of Housing and Urban Development (HUD) said lenders and mortgage brokers would have to provide buyers with a ‘Good Faith Estimate’ (GFE) identifying loan terms and costs.

The reform is part of a final set of changes to the Real Estate Settlement Procedures Act (RESPA).

HUD said this move alone could save some property buyers as much as $700 in the closing costs of mortgages.

HUD secretary Steve Preston said:

“It has been a long road but today we can finally announce a better way to buy homes in America.

“Consumers need and deserve to know what they’re getting themselves into before they sign on the dotted line.”

Officials also said millions of Americans “simply don’t understand” the small print of their own mortgage agreements and this was at the heart of the current home loan crisis.

However, the power of the new rule has come into question, with the Wall Street Journal reporting officials admitted they do not have legal power to crack down on lenders who ignore it.

New laws would be needed to give HUD these powers, but the Journal also said officials believe state and federal regulators and the threat of being sued could make mortgage providers obey the changes.

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