Hi all,

The Federal Reserve has amended the Regulation Z, also known as The Truth in Lending Act (TILA), and added a new set of consumer protection rules to the existing regulation. These rules apply to all lenders and add a few important protections for higher priced mortgage loans.

Under the new rules, the lenders will now have to verify the borrowers' credit and income to determine their ability to repay loans. The lenders are required to set up escrow accounts for payment of property taxes and homeowner's insurance for all first lien mortgages. The rules also ban prepayment penalty on loans, if the payment is expected to change in the initial 4 years. For other types of higher priced mortgages, the prepayment penalty period cannot extend beyond 2 years. These new rules have taken effect from Oct. 01, 2009.

Thanks,

Jerry