In order to govern the mortgage lending process, various home mortgage laws and regulations have come into effect. These mortgage laws have been put into force in order to protect the consumers and their financial information. All the home mortgage laws are actually federal laws and are accepted in all the states. There are certain states which have their own laws regarding mortgage lending which protect the borrowers. These laws help borrowers to avoid foreclosure or bankruptcy filing.
Home mortgage laws that can help you avoid bankruptcy
Read on to know the major home mortgage laws which have been drafted and put into effect to help the consumers:
1. Real Estate Settlement Procedures Act: Popularly known as RESPA, this law requires certain disclosures to the borrowers and prohibits the lenders to go for practices which may increase the closing costs. As per this law, the lender has to offer a Good Faith Estimate (GFE). If the borrower knows what type of closing costs he needs to pay, it will help him decide whether or not he will be able to afford the loan. If he/she cannot afford the closing costs, the loan can be cancelled so that later on the borrower does not have to face the embarrassing situation of filing bankruptcy. Apart from this, RESPA also prohibits the lenders from any kind of kickbacks, fee-splitting, etc. The lender will also have to provide the borrower with a HUD-1 Settlement Statement and an initial escrow statement.
2. Fair Credit Reporting Act: Also known as FCRA, this law was adopted in 1978 in order to promote accuracy in credit reporting. Another aim of this law is to look after the privacy of the financial information given by the consumer to the home mortgage lenders and other creditors. Due to errors in credit report, there have been instances where people had to file bankruptcy.
3. Homeowner’s Protection Act: This act is also known as the PMI Act and was adopted in 1998. It establishes rights for homeowners to cancel the Private Mortgage Insurance (PMI). It also specifies the rules for lenders regarding PMI cancellation. The act applies to mortgages obtained on or after July 29, 1999. Normally, the lenders ask the borrowers to go for PMI when they are unable to offer 20% down payment. At times, paying this PMI along with the mortgage payments and other debts becomes quite problematic for the borrowers and they have to file bankruptcy to get rid of this situation. Cancellation of PMI can be of great help to borrowers in order to lower their payments.
4. Fair Debt Collection Practices Act (FDCPA): Many a times, home mortgage borrowers have to face harassing phone calls regarding their loan payments from the lenders. Borrowers normally get irritated with such calls and other abusive practices of the lender and file bankruptcy to get rid of it. FDCPA was adopted in 1977 and prohibits certain methods of debt collection. Apart from this, it also prohibits the lender from disclosing debt information to third parties.
Apart from the above mentioned acts and laws, Gramm-Leach-Bliley Act adopted in 1999, also protects the financial information of the home mortgage borrowers. It emphasizes on privacy requirements through its Financial Privacy Rule, Safeguards Rule and Pretexting thereby helping the borrowers to avoid bankruptcy in the long run.