Clearer mortgages in the new year
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Stacey Vanek-Smith: All that sturm und drang we saw in the banking sector this year starte, of course, with mortgage loans. The new year means new rules for that industry, as Alisa Roth reports.
Alisa Roth: The new rules are a major overhaul of the Real Estate Settlement Procedures Act, or RESPA. They’re supposed to make sure homebuyers know exactly what they’re getting into when they sign those mortgage papers.
Among other things, lenders will have to give the borrowers a three-page booklet that details all the costs associated with the loan: closings costs, brokers fees, the price of title insurance.
Chris Mayer is a professor at Columbia Business School. He says the overhaul is a good start, but that it may not go far enough.
Chris Mayer: I think it is a very challenging process to take somebody who is applying for a mortgage and give them a piece of paper that provides adequate financial education.
A lot of people in the mortgage industry are complaining that it’s unclear how they’re supposed to implement the new rules. And the added work could discourage people from buying houses. Mayer says paperwork hassles have certainly made it hard for various loan modification problems lately.
Mayer: There really is a problem that if we start requiring more and more stuff, that it’s going to slow down the process.
These changes are the first in decades. Mayer says he expects to see many more tweaks to come.
I’m Alisa Roth for Marketplace.
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