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How to Avoid Financial Shenanigans


Earlier this year, the CFPB issued one of its regular bulletins, announcing a range of financial rules that financial institutions may sometimes "ignore" or outright defy, to the detriment of the public they serve. Just by knowing the rules, you can learn how to take care of yourself. Below are some of the highlights.

Regulation Z Reins in Mortgage Originators

This regulation "prohibits a loan originator from receiving compensation based, directly or indirectly, on the terms of a consumer credit transaction secured by a dwelling." This isn't new; it's been around since 2011. But recently government investigations have found evidence that some institutions have ignored this.

Regulation Z is one of the homeowner's best friends, requiring lenders to reveal a range of details about a loan.

Getting Serious on Good-Faith Estimates

And then there is Regulation X, which requires loan originators to generally stick to the settlement charges and terms listed on the good-faith estimate provided to the borrower, unless it issues a revised GFE before settlement. And it has to document a reason for that second GFE. Again, investigations uncovered situations where poorly trained lenders with inadequate compliance procedures  overcharged.

There's a timing issue as well. Lenders have only three business days after they receive an application to provide a GFE. Lenders don't always correctly log in the correct day an application is received, thus improperly extending the time they have to provide the GFE. So homeowners should keep records of what they send and when.

Take a Close Looks at Ads

The fine print is serious. You have a right to see the details — the essential disclosures — in any advertised loan product. This is true even with social media posts. Again, investigators found instances where "loan originators advertised the length of payment, amount of payments, numbers of payments and finance charges without providing the required disclosures, a violation of Regulation Z."

For further advice, you can access the full CFPB document online.


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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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