Obama's Plan for a Consumer Financial Protection Agency

This past week saw the release of information for a potential Consumer Financial Protection Agency proposed by President Obama. Nothing is set in stone yet and it is uncertain if this agency will come to pass. However, it cold lead to additional oversight and changes aimed at protecting consumers with financial instruments including mortgages. However, as with many government proposals and initiatives that we have seen with the end claimed results being helping consumers, we will reserve judgment until we see results. The plan perhaps looks good on paper in Washington, but what effect will this have on Main Street if it comes to pass? Here is what we know so far.

The agency would:

* be accountable as primary federal financial consumer protection supervisor.

* have broad authority to protect consumers of credit, savings, payment, and other financial services and regulate such products and services.

* have "full authority" to enforce protections through orders, fines and penalties.

* define standards for plain products and subject alternative products to greater scrutiny.

* ban unfair terms and practices or restrict terms and practices for products that may have benefits.

* help ensure executive pay does not create conflicts of interest between consumers and financial firms.

* enforce fair lending laws and the Community Reinvestment Act, which requires financial institutions to serve sparsely populated or low-income areas.

* overhaul mortgage laws to make them clearer and fairer to consumers.

* require firms to offer a simple mortgage with straightforward terms and uniform disclosure. Consumers could opt for alternative loans but these would be subject to restrictions.

* ban unfair practices such as "yield spread premiums," which entitle mortgage brokers to higher fees if they steer consumers to mortgages with higher costs.

* require mortgage brokers to be paid over time based on loan performance rather than in a lump sum at closing.

* restrict or ban prepayment penalties.

* require loan originators or loan bundlers to retain 5 percent of credit risk.

When we receive additional information and details on the new proposed agency, we will as always pass them along.

For more information on consumer initiatives, home purchase loan or refinance programs for existing and potential home owners, please contact Bill Kamboukos and Carlos Felix of Strategic Mortgage at (480) 219-3682 or by emailing: info@strategicmtgaz.com or online at www.strategicmtgaz.com