Regulation Z Proposed Rule Would Mean More Cash to Close

The proposed rule revising Regulation Z, specifically Docket Number R-1366, by the Federal Reserve Board would increase the amount of money consumers would need to bring to closing. This increase in cash to close comes from the elimination of Yield Spread Premium, which has long been used to help cover consumers closings costs, or offset the origination fee.  The new Good Faith Estimate going into effect January 01, 2010 requires that all Yield Spread Premium be given as a credit to the consumers origination costs.

The comment period for the Proposed Rule is available until December 24, 2009.  It is urgent that your voice be heard.  You can read the 191 pages describing the proposed rule in the Federal Register at: http://edocket.access.gpo.gov/2009/pdf/E9-18119.pdf

• Eliminates No-Cost Loans. Consumers who already own a home will no longer be able to do No cost or no fee loans.  This is significant because many consumers do not have adequate equity in their house, or cash for closing costs.  This will prevent consumers from realizing the savings from lower interest rates.
• Less Flexibility.  Yield Spread Premium allows for loans to be structured in the best way to benefit the consumer.
• More Cash Will be Needed. Consumers will no longer be able to have a portion of their closing costs paid on purchase through the use of Yield Spread Premium.  Thus more consumers will need to wait longer, or forgo altogether, the dream of homeownership, simply from not having enough money for the down payment and closing costs.  For those eligible a USDA Home Loan could potentially solve both the down payment and closing cost problem.
• Eliminates Competition. The proposed rule will cause a damage to mortgage brokers, and likely result in a further reduction in the number of mortgage brokers, which would ultimately lead to higher costs through less competition.

How your Voice can be heard on the Proposed Rule revising Regulation Z:

› Web Site: http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm Scroll down to Regulation Z – Truth in Lending – Closed-end Mortgage [R-1366], click on Submit comment on this proposal

› Federal eRulemaking Portal: Change the Select Document Type to Proposed Rule, enter keyword “R-1366″, click Search, Click on the Submit a comment balloon on far right hand side of results, the ID is:  FRS-2009-0240-0001

› E-mail: regs.comments@federalreserve.gov Include the docket number:  ”Docket Number R-1366″ in the subject line of the message.

› Fax: 202-452-3819 or 202-452-3102

› Mail: Jennifer J. Johnson, Secretary, Board of Governors of the Federal Reserve System, and Constitution Avenue, N.W., Washington, DC 20551

The Easiest way to comment online: http://www.federalreserve.gov/generalinfo/foia/ElectronicCommentForm.cfm?doc_id=R-1366&doc_ver=1&name=Regulation%20Z%20-%20Truth%20in%20Lending%20-%20Closed-end%20Mortgages&date=20090723a

All public comments are available at the Boards web site at:  http://www.federalreserve.gov/generalinfo/foia/index.cfm?doc_id=R-1366&doc_ver=1 as submitted, unless modified for technical reasons.  This means that the information you submit, including identifying information and contact information will be visible.

I sent in my comments and a proposal. Will you do the same?

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