The Federal Reserve has issued a proposal to amend a 42-year-old provision of the federal Truth in Lending Act. The change would make it far more difficult for homeowners to stop foreclosures and get out of predatory home loans with extremely unfavorable terms.
In response, numerous foreclosure defense attorneys, civil rights, labor and consumer advocacy groups have formally written the Reserve’s Board of Governors to ask for the withdrawals of the proposal. In addition, they have suggested any future changes or updates to the Truth in Lending Act be handled by the newly-formed Consumer Financial Protection Bureau. This new bureau is slated to begin work in 2011.
One excerpt of the letter includes the following:
“At the depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Fed has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of recision.”
The 1968 Truth in Lending Act gave homeowners the right to cancel or rescind illegal loans for up to three years after the transaction was completed (if the buyer wasn’t provided with proper disclosures at the closing.)
We’ll keep you posted here as this latest drama plays out in the housing market, as there will surely be several more chapters to this controversial proposal.
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