If the Federal Reserve has its way, so-called Truth in Lending will get a whole lot “truthier.”
The Federal Reserve Board on Monday, August 16, proposed enhanced consumer protections and disclosures for home mortgage transactions. The proposal includes changes to Regulation Z (Truth in Lending) and represents the second phase of the Board’s comprehensive review and update of the mortgage lending rules in the regulation. The proposed changes reflect the results of consumer testing by the Board, which will begin accepting public comment. The latest proposal would:
? Improve the disclosures consumers receive for reverse mortgages and impose rules for reverse mortgage advertising to ensure advertisements contain accurate and balanced information;
? Prohibit certain unfair practices in the sale of financial products with reverse mortgages;
? Improve the disclosures that explain a consumer’s right to rescind certain mortgage transactions and clarify the responsibilities of the creditor if a consumer exercises the right; and
? Ensure that consumers receive new disclosures when the parties agree to modify the key terms of an existing closed-end mortgage loan.
Under the proposed rules, consumers would receive disclosures on or with the application form, using simple language to highlight the basic features and risks of reverse mortgages. Shortly after filling out the application, consumers would receive transaction-specific disclosures that reflect the actual terms of the reverse mortgage being offered.