A more thorough explanation:
Definition: The Dodd-Frank Act was created in response to the 2008 economic crisis, which was partly caused by the real estate bubble bursting. Title XIV of the Act, also known as the Mortgage Reform and Anti-Predatory Lending Act, aims to protect borrowers from predatory lending practices and establish minimum standards for mortgage products.
Examples: Title XIV includes provisions such as:
- Requiring mortgage originators to be properly qualified, registered, and licensed, and to comply with regulations designed to monitor their operations.
- Prohibiting mortgage originators from receiving compensation that is correlated to the face amount of the loan, which should reduce incentives for steering borrowers towards loans they cannot repay.
- Establishing minimum standards for all mortgage products, including a requirement for creditors to reasonably determine that the borrower can repay the loan based on their credit history, income, and other factors.
- Prohibiting certain types of prepayment penalties and balloon payments that rapidly increase scheduled payments.
- Requiring additional disclosures to borrowers for home mortgages, both at the time the mortgage is made and in monthly loan statements.
- Establishing the Office of Housing Counseling to provide information, educational programs, and assistance to borrowers during the mortgage application process.
- Prohibiting mortgage servicers from obtaining force-placed insurance without reasonable basis, charging fees for responding to valid written requests, and failing to comply with other obligations.
- Requiring creditors to get a written appraisal of the property before extending a higher-risk mortgage to a borrower.
- Creating a program to help protect current and future residential tenants by making sure the property owner has sustainable financing and funds for rehabilitation of the property.
Explanation: These examples illustrate how Title XIV of the Dodd-Frank Act aims to protect borrowers from predatory lending practices and establish minimum standards for mortgage products. By requiring mortgage originators to be properly qualified and prohibiting certain types of prepayment penalties and balloon payments, borrowers are less likely to be steered towards loans they cannot repay. The additional disclosures and establishment of the Office of Housing Counseling also provide borrowers with more information and assistance during the mortgage application process. The Act also aims to protect tenants and establish a program to provide foreclosure legal assistance to low- and moderate-income homeowners and tenants.