Mortgage consumer protection coming soon

The financial reform bill signed into law by President Obama included the creation of a powerful Consumer Financial Protection Bureau to oversee the mortgage lending industry.

Industry leaders say some of the core changes promised by the legislation are either already in effect, such as stricter underwriting and documentation practices, or should be soon.

One of the earliest and most widely anticipated changes in the real estate field will involve appraisals on homes. The law requires the agency to quickly come up with new interim rules on appraisal accuracy and independence designed to replace the controversial “Home Valuation Code of Conduct” rules imposed by Fannie Mae and Freddie Mac in 2009.

Among the early projects expected from the new bureau will be a rewrite and streamlining of the existing home purchase disclosures and a tie-in with a revised truth-in-lending disclosure, possibly all wrapped up in a single plain-language package.

Another early benefit will be the installation of a national hotline system that will allow aggrieved mortgage borrowers and others to lodge complaints and alert the bureau to unfair and deceptive practices.

In a companion move, the reform law also sets standards for appraisal management companies that function as third-party vendors for many lenders. These companies have been criticized for assigning valuations to inexperienced appraisers who are unfamiliar with local conditions and willing to work for low fees.