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Consumer Financial Protection Bureau issues rules to strengthen protections for high-cost mortgages

Consumer Financial Protection Bureau issues rules to strengthen protections for high-cost mortgages

Bureau Also Expands Time Frame for Required Escrow Accounts

WASHINGTON, D.C., Jan. 10, 2013, Today the Consumer Financial Protection Bureau (CFPB) issued final rules to strengthen consumer protections for high-cost mortgages and to provide consumers with information about homeownership counseling. The Bureau also finalized a rule that requires escrow accounts be established for a minimum of five years for certain higher-priced mortgage loans.

“Addressing problems in the mortgage market is critical to helping our economy recover,” said CFPB Director Richard Cordray. “Today’s changes will better help consumers to understand the real costs of owning a home while protecting them from harmful practices that can trap them into high-cost mortgages.”

The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 to address abuses in home-equity lending and refinances. Since then, HOEPA has deterred high-rate and high-fee lending in those markets. In recent years, high-cost mortgages have made up only about 0.2 percent of those types of loans.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) expanded HOEPA to cover home purchase loans and home equity lines of credit (“HELOCs”); revised HOEPA’s rate- and fee-thresholds for coverage; added a new coverage test based on a transaction’s prepayment penalties; and provided new limitations on risky loan features, as well as other new protections for high-cost mortgages. The CFPB has finalized rules to implement the Dodd-Frank Act’s amendments to HOEPA.

For loans that are high-cost mortgages, today’s final rule:

  • Bans potentially risky features: For mortgages that qualify as high-cost, the rule      generally bans balloon payments (a large, lump sum payment usually due at      the end of the loan) with some exceptions, such as for certain types of      loans made by creditors serving rural or underserved areas, and bans      penalties for paying the loan early.
  • Bans and limits certain fees and practices: The CFPB’s rule bans fees for modifying loans, caps      late fees at four percent of the payment that is past due, generally      prohibits closing costs from being rolled into the loan amount, and      restricts the charging of fees when consumers ask for a payoff statement      (a document that tells borrowers how much they need to pay off the loan).      The rule also prohibits certain bad practices, such as encouraging a      consumer to default on an existing loan to be refinanced by a high-cost      mortgage.
  • Requires housing counseling: The rule requires consumers to receive housing      counseling before taking out a high-cost mortgage.

In addition to strengthening the protections for high-cost mortgages, the Bureau today is implementing a requirement of the Dodd-Frank Act that lenders provide a list of homeownership counseling organizations to consumers shortly after they apply for a mortgage so consumers know where to get help when deciding what loan is best for them.

The Bureau is also implementing other changes made by the Dodd-Frank Act concerning escrow accounts. An escrow account is an account that a lender may set up to pay certain recurring property-related expenses on a consumer’s behalf, such as property taxes and homeowner’s insurance. Escrow accounts help to ensure that consumers have enough money to pay those bills when they come because the lender breaks the expenses down into monthly installments and adds them to the monthly mortgage payment. Through an escrow account, consumers can better see the true cost of owning a home with insurance and tax costs laid out with each mortgage payment and are better assured that those costs are paid in a timely manner.

Under current regulations, creditors are required to establish escrow accounts for certain higher-priced mortgage loans for a minimum of one year. Today’s final rule implements changes from the Dodd-Frank Act that generally extend the required duration of an escrow account on such mortgage loans from a minimum of one year to a minimum of five years. To preserve access to credit, the rule exempts loans made by certain creditors that operate predominantly in rural or underserved areas, as long as certain other criteria are met.

The rules will be available later today at: http://www.consumerfinance.gov/regulations

 

A consumer guide to the final HOEPA rule can be found at: http://files.consumerfinance.gov/f/201301_cfpb_high-cost-mortgage-rule_what-it-means-for-consumers.pdf

 

A consumer guide to the final Escrows rule can be found at: http://files.consumerfinance.gov/f/201301_cfpb_escrow-requirements-rule_what-it-means-for-consumers.pdf

Categories
Financial News Products and Services Recalls

Fisher-Price Recalls to Inspect Rock ‘N Play Infant Sleepers Due to Risk of Exposure to Mold

WASHINGTON, Consumers should immediately inspect this product and stop using it if mold is found. Units currently in retail stores are not included in this recall to inspect.

Recall Summary

Name of product: Newborn Rock ‘n Play Sleeper™

Hazard: Mold can develop between the removable seat cushion and the hard plastic frame of the sleeper when it remains wet/moist or is infrequently cleaned, posing a risk of exposure to mold to infants sleeping in the product. The CPSC advises that mold has been associated with respiratory illnesses and other infections. Although mold is not present at the time of purchase, mold growth can occur after use of the product.

Remedy: Consumers should immediately check for mold under the removable seat cushion. Dark brown, gray or black spots can indicate the presence of mold. If mold is found, consumers should immediately stop using the product. Consumers can contact Fisher-Price for cleaning instructions or further assistance. Cleaning and care instructions can also be found at www.service.mattel.com or by contacting the firm.

Consumer Contact: Fisher-Price; at (800) 432-5437, from 9 a.m. to 6 p.m. ET Monday through Friday, or online at www.service.mattel.com for more information.

Photos are available athttp://www.cpsc.gov/cpscpub/prerel/prhtml13/13087.html.

Recall Details
Units:
About 800,000 units
Description: This recall to inspect includes all Fisher-Price Rock N’ Play infant recliner seats called sleepers. The sleeper is designed for babies up to 25 pounds and is composed of a soft plastic seat held by a metal rocking frame. The product has a removable, fabric cover that is sold in 14 patterns and color palettes.
Incidents/Injuries:
Fisher-Price has received 600 reports of mold on the product. Sixteen consumers have reported that their infants have been treated for respiratory issues, coughs and hives after sleeping in the product.
Sold at: Mass merchandise stores nationwide and online since September 2009 for between $50 and $85. Units currently in retail stores are not affected by this recall to inspect. Only products that show signs of mold after use by consumers are included in this announcement.
Importer: Fisher-Price Inc., of East Aurora, N.Y.
Manufactured in:
China

The U.S. Consumer Product Safety Commission (CPSC) is still interested in receiving incident or injury reports that are either directly related to this product recall or involve a different hazard with the same product. Please tell us about your experience with the product on SaferProducts.gov.

Media Contact
Please use the phone numbers below for all media requests.
Phone: (301) 504-7908
Spanish: (301) 504-7800

CPSC Consumer Information Hotline
Contact us at this toll-free number if you have questions about a recall:
800-638-2772 (TTY 301-595-7054)
Times: 8 a.m. – 5:30 p.m. ET; Messages can be left anytime
Call to get product safety and other agency information and to report unsafe products.

CPSC is charged with protecting the public from unreasonable risks of injury or death associated with the use of the thousands of consumer products under the agency’s jurisdiction. Deaths, injuries, and property damage from consumer product incidents cost the nation more than $900 billion annually. CPSC is committed to protecting consumers and families from products that pose a fire, electrical, chemical, or mechanical hazard. CPSC’s work to ensure the safety of consumer products—such as toys, cribs, power tools, cigarette lighters, and household chemicals—contributed to a decline in the rate of deaths and injuries associated with consumer products over the past 30 years.

Under federal law, it is illegal to attempt to sell or resell this or any other recalled product.

To report a dangerous product or a product-related injury, go online to: SaferProducts.gov, call CPSC’s Hotline at (800) 638-2772 or teletypewriter at (301) 595-7054 for the hearing and speech impaired. Consumers can obtain this news release and product safety information at www.cpsc.gov. To join a free e-mail subscription list, please go to www.cpsc.gov/cpsclist.aspx.

SOURCE U.S. Consumer Product Safety Commission

RELATED LINKS
http://www.cpsc.gov