An official website of the United States Government

Blog

Live from Phoenix!

By

Today, we held “Protecting homeowners: New tools for empowering consumers and advocates” in Phoenix.

The live event has ended.

This event was a training for housing counselors, legal aid attorneys, and other advocates on the new mortgage servicing rules that take effect today. The training also featured remarks from Director Richard Cordray.

Find out more about our work on mortgages.

A recording of the event is available below.

If you’re having trouble paying your mortgage, here’s how you can take control

By

The most important thing you can do when you’re having trouble paying your mortgage is take control. There is nothing worse than doing nothing. Taking control means taking two steps:

  • Talk to your mortgage servicer about possible solutions.
  • Contact a professional HUD-approved housing counseling agency for no-cost assistance to figure out your options. Find a housing counselor online or call 888-995-HOPE (4673).

Housing counselors are trained to help you fill out the documents you will need to submit to get help. They can also walk you through the choices you will face. It’s also very important that you read the notices and information your mortgage servicer sends you.

There are many programs out there that can help you either keep your home or leave it with relocation assistance and potentially less damage to your credit. Depending on when you took out your mortgage and how delinquent you are, programs like the Home Affordable Refinance Program (HARP) and the Home Affordable Modification Program (HAMP) can help you lower your mortgage payment or avoid an unnecessary foreclosure. If you’re unemployed, you may also be eligible for short-term help.

Also, new rules require your mortgage servicer to contact you soon after you become delinquent and let you know about options that may be available to you to avoid foreclosure. To get this help, you’ll need to fill out an application for mortgage assistance or “loss mitigation” as it is often called. It’s important that you provide all the information that your servicer asks for, otherwise the servicer can’t complete its evaluation.

Learn more about the new mortgage rules and the procedures mortgage servicers must follow in dealing with borrowers facing foreclosure.

You can submit a complaint about your mortgage online or by calling (855) 411-2372 and we’ll work to get you a response.

Qualified Mortgages – What are they and what do they mean for you?

By

If you’re looking to buy a home in 2014, you’ve probably read or heard about something called a Qualified Mortgage. Here’s what you need to know about Qualified Mortgages, which are sometimes called just QMs.

Qualified Mortgages are based on some common-sense ideas:

  • The borrower should be able to repay the loan.
  • The terms of the loan should be safer for borrowers.
  • The loan should also be easier to understand. That means you won’t see QMs with complicated and risky features such as negative amortization or interest-only periods.

To get a standard Qualified Mortgage, your monthly debt-to-income ratio generally must be at or below 43 percent. This means that no more than 43 percent of your gross monthly income is needed to pay your fixed debts including your mortgage and other debts such as car loans. Generally, financial planners recommend that borrowers keep their debt payments much lower than 43 percent of their income.

Your lender has to evaluate your ability to repay the loan, but just because the lender is willing to loan you a certain amount, doesn’t mean it is right for you. You still have to decide if the proposed loan payment fits comfortably in your budget and allows you to achieve your other goals.

Another protection of a Qualified Mortgage is a limit on up-front fees. In the years before the housing crisis, some lenders charged borrowers very high loan origination fees. A QM limits the points and fees a lender can charge to no more than 3 percent of a loan over $100,000. The limits are somewhat higher for loan amounts under $100,000.

Not every loan has to be a standard QM. Borrowers should still have other loan options, such as jumbo and balloon loans or loans that allow a higher debt-to-income ratio. But even when a loan is not a Qualified Mortgage, lenders must still evaluate your income, debts, and other financial information to make sure you have the ability to repay.

Got more questions about mortgages? You can find answers on Ask CFPB.

Helping student loan borrowers stay afloat

By

This morning, CFPB Director Richard Cordray, Education Secretary Arne Duncan, and Acting Deputy Treasury Secretary Mary Miller convened a meeting with the nation’s largest private student lenders and servicers who work with millions of borrowers and their families.

Unfortunately, too many student loan borrowers are struggling. According to a report we published jointly with the Department of Education, there were more than 850,000 private student loans in default, with even more in delinquency.

Unlike federal student loans, private student loans generally lack flexible repayment options when borrowers run into trouble.

We’ve received thousands of complaints from private student loan borrowers. The most common complaint comes from those who are unable to negotiate a repayment plan that they can actually afford. Many of you have told us that you want to pay back your loan, but you just need a payment plan that works for you, especially when you haven’t yet found a full-time job in a tough market.

Many of the financial institutions represented in today’s meeting received extraordinary assistance from federal government programs when they faced their own financial distress. We were very encouraged to hear that many of them are launching initiatives this year to help their customers weather the storm and get back on their feet.

In the meantime, we’ll keep working to help you find a way to make ends meet. To learn more about your options when repaying private and federal student loans, check out Repay Student Debt. Still need help resolving a student loan issue? Submit a complaint.

Borrowers need more options to avoid default, which is in the best interest of borrowers, financial institutions, and the economy more broadly. We’ll be monitoring this market closely to determine whether or not financial institutions are making progress.

Rohit Chopra is the CFPB’s Student Loan Ombudsman.

Updated at 1:55 p.m.to reflect that Ms. Miller attended on behalf of Treasury Secretary Jacob Lew.

Here’s what the new mortgage rules mean for you

By

It’s simple. Our new mortgage rules mean you will have more information and more protection when you’re shopping for a loan and while you own your home.

In the run-up to the housing crisis, some lenders made loans without checking a borrower’s income, assets, or debts. That turned out to be a pretty bad idea. And, when many borrowers couldn’t repay their loans, the economy was hurt badly.

Our new mortgage rules help change that. They’ll help protect you by requiring your lender to make a “good-faith, reasonable effort” to determine that you are likely to be able to repay your loan. That means the lender will check and verify your income, assets, debts, credit history, and other important financial information. And no more qualifying you based only on those initial “teaser” rates that trapped some consumers.

More protections
Lenders who meet certain requirements for what we call Qualified Mortgages–or QMs– are presumed to have made that good-faith, reasonable effort to check your ability to repay. QMs have several characteristics that protect consumers. First, QMs can’t have risky features like negative amortization or no-interest periods. Second, QMs are available with some exceptions to borrowers who have a monthly debt-to-income ratio of 43 percent or less, meaning that the total of their monthly mortgage payment, plus other fixed debts like car loans, is not more than 43 percent of their monthly gross income. Most people taking out a mortgage now have a debt-to-income ratio of around 38 percent.

You’ll also have less to worry about when you hire someone to help you find a mortgage. Loan officers and mortgage brokers have to follow rules to protect you from certain conflicts of interest. That means anyone you pay to help you find a mortgage generally can’t also be paid by someone else. And your loan officer or mortgage broker can’t get paid more to put you into a loan that has a higher interest rate.

More information
The new rules empower you to get important information about your mortgage. You’ll get a new periodic mortgage statement or coupon book that gives you important information about your monthly payment in one place. If you have questions about your mortgage or you think your servicer has made a mistake, the servicer is required to respond to your written inquiries quickly.

If your financial situation changes and you are having trouble making your mortgage payments, servicers now have to reach out under certain circumstances and send written information describing how you can apply for the options available to avoid foreclosure. During the housing crisis, mortgage servicers were often ill-prepared to help borrowers in trouble. Important paperwork was often lost and borrowers were frustrated by servicers who couldn’t give them accurate information about their options for avoiding foreclosure. Now your servicer has to ensure that employees assigned to help you will be able to answer your questions and important documents won’t go missing.

You can think of all these changes as a “back to basics” moment for the mortgage market: No debt traps, surprises, or runarounds. And a market where, if you run into trouble paying your mortgage, you’ll have a fair shot at all the options available to help you avoid foreclosure.

To learn more about our work on mortgages, check out consumerfinance.gov/mortgage.

It’s back to basics for the mortgage market in 2014

By

This month, new consumer protections for homebuyers are going to take effect. The Ability-to-Repay and Qualified Mortgage rule is a “back-to-basics” approach to mortgage lending that will protect consumers from the debt trap of a mortgage they can’t afford. Starting January 10, lenders will be required to make a reasonable, good-faith determination that a borrower can afford to repay a mortgage. That’s a common-sense policy that responsible lenders have already been following for decades – and this month it will be the law.

The Ability-to-Repay and Qualified Mortgage rule is an important development for the mortgage market, and as the effective date gets closer, there have been rumors about what the rule does and does not do. Today, we are releasing a fact vs. fiction guide to help dispel some of the most common misconceptions about what this new rule actually means for consumers.

The CFPB blog aims to facilitate conversations about our work. We want your comments to drive this conversation. Please be courteous, constructive, and on-topic. To help make the conversation productive, we encourage you to read our comment policy before posting. Comments on any post remain open for seven days from the date it was posted.