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Back to Basics; Mortgage brokers are going to have to do business differently under the changes in Reg. Z.

Article Excerpt
Byline: Jennifer Harmon

Brokers are going back to basics. That is the result of the final rule amending Regulation Z through which the goal of lawmakers is to return the marketplace back to where free-flow of mortgage credit is available to borrowers.

One of the hallmarks of the recently approved final rule by the Federal Reserve Board for home mortgage loans to better protect consumers and facilitate responsible lending is the requirement on subprime or higher-priced loans, including mortgages where the triggers of the Home Ownership and Equity Protection Act are met.

The creditor is required to prove by an independent third party means, the borrower's ability to repay. This standard is significant, according to Joe Falk, past president of the National Association of Mortgage Brokers, because it now includes taxes and insurance payments. For adjustable-rate mortgage loans or loans where the payment can change, originators must determine qualifying income on the highest possible payments. This requires a change in the way products are structured.

"One cannot...

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