Market Overview

Consumers Now Protected from Irresponsible Lending


The Federal Savings Bank is optimistic about a decrease in future foreclosures based on the a new rule from the Consumer Financial Protection Bureau.

Chicago, IL (PRWEB) January 17, 2013

The Federal Savings Bank is optimistic that number of homeowners who will go through foreclosures in the coming months could decrease. The mortgage bank sentiment stems from a recently passed rule by the Consumer Financial Protection Bureau.

The new rule will protect consumers from irresponsible lending practices, ensuring prospective first-time homebuyers have the ability to pay their mortgage. Some of the risky lending practices that consumers are now protected from are No Doc and "interest only" features.

No Doc loans refer to finance products that are offered to consumers who don't qualify for normal loan products or wish to not have their financial privacy relinquished. A possible scenario that could arise that makes a person request a No Doc loan is if they are moving to another community as a result of business but has no income or assets that can be documented or verified.

Interest-only loans allow borrowers to pay only the interest on the principal balance, with the principal balance not changing. An interest-only mortgage might be good for someone who doesn't have consistent income or someone who expects to earn a lot more in a few years.

“When consumers sit down at the closing table, they shouldn't be set up to fail with mortgages they can't afford,” said CFPB Director Richard Cordray. “Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”

Foreclosures on a decline

Considering the number of loans that were issued to borrowers without having full documentation of their ability to pay back the money to lenders, Americans were placed in financially troubling situations, with a higher number of foreclosures being seen across the country and many consumers looking to rent instead of owning.

Despite the troubles over the past few years, Americans can now look forward to better days for the housing market, as foreclosures have recently decreased from early 2012. CoreLogic recently released its National Foreclosure report for November 2012, showing there were 55,000, which is a significant decrease from the 72,000 that were reported during the same time the previous year.

For the original version on PRWeb visit:

View Comments and Join the Discussion!

Partner Center