Bank of England pulls back on support for home loans

source: http://newscenter.springhillgrouphome.com/2013/12/bank-england-pulls-back-support-home-loans/

The Bank of England plans to cut its support for mortgage lending in the U.K. and nudge banks towards lending more to small businesses, it said Thursday, November 28.

The move is an answer to increasing concern that a speedy pickup in housing market activity in Britain could ultimately turn unpleasant, affecting banks and borrowers, and also as longstanding worries that small firms are being starved of credit, hindering economic recovery.

What’s more, it is a sample of the growing willingness of central banks across the globe to organize customized policies to maneuver their economies, rather than relying exclusively on official interest.

The BOE said in its twice-yearly financial stability report that although there is little evidence that quickening activity in Britain’s housing market poses an immediate threat to financial stability, “risks may grow if stronger activity is accompanied by further substantial and rapid increases in house prices and a further buildup in household indebtedness.”

The central bank said property has played “a central role” in many previous economic and financial crises. In the U.K., real estate accounts for 70% of non-financial assets.

House prices in the U.K. have climbed speedily in past months, formed worries over the materialization of a new bubble in prices. A government mortgage-support program for would-be homebuyers called Help-to-Buy had pave the way for a boost in mortgage lending, together with an increase in the number of riskier loans on offer that entail merely a small down payment.

The BOE said that in response to the pickup in housing-market activity and an ongoing dearth in small-business lending it has decided to overhaul its flagship Funding-for-Lending Scheme, or FLS, which offers banks cheap cash provided they use it to dish out loans to households and businesses.

Banks drawing on the FLS will from January no longer benefit from reduced capital requirements on new mortgage loans, the BOE said. On the other hand, capital relief will carry on for small business loans. Banks engaged in small business lending will also pay a smaller flat-rate fee of just 0.25% to use the FLS and will be able to draw more cash from the facility, the BOE added.

The changes were settled with Chancellor of the Exchequer George Osborne.

“Now the housing market is starting to pick up, it is right that we focus the scheme’s firepower on small businesses,” Osborne said. BOE Gov. Mark Carney said extra support for mortgage lending is “no longer needed.”

New Mortgage Disclosure Forms to Roll Out In August 2015

 

The shorter forms, set to be adopted by the Consumer Financial Protection Bureau, will demonstrate buyers more evidently the terms and cost of a home loan.

http://springhillgrouphome.com/2013/12/new-mortgage-disclosure-forms-to-roll-out-in-august-2015/

The federal government’s consumer financial watchdog will necessitate lenders to issue shorter, easier-to-understand mortgage disclosure forms to home buyers that more noticeably show the costs and terms of the loans.

The Consumer Financial Protection Bureau plans to issue the rule Wednesday, November 20, subsequent through on what was an initiative launched in 2011 as the then-fledgling agency’s first major action.  

The early Know Before You Owe forms were welcomed by consumer and industry groups as a development more than the more intricate disclosures essential under federal law for more than 30 years.  The bureau said the new forms would make it easier for home buyers to compare loan offers.

“Taking out a mortgage is one of the biggest financial decisions a consumer will ever make,” said Richard Cordray, the bureau’s director. “Our new Know Before You Owe mortgage forms improve consumerunderstanding, aid comparison shopping and help prevent closing … surprises for consumers.”

Lenders will be mandated to use the new forms, available in English and Spanish, starting Aug. 1, 2015.

The forms will be given to potential home buyers when they apply for a mortgage and when they close on the loan. They will make available the detailed information like the estimated monthly principal and interest payments, closing costs and any prepayment penalties or balloon payments.

The latest loan estimate form and the closing disclosure form use large and bold type for important information like the interest rate and feature highlighted headings and terms to make them easier to read.

Lenders will be obliged to provide the new closing disclosure form to home buyers three days before the closing.  That would give borrowers time to read and understand the information before the loan closes.  Lenders will not be allowed to change the fees and costs on the form at the closing “unless there is a legitimate reason,” under the bureau’s new rule.  

The bureau assembled public and industry feedback on the forms after introducing them in May 2011.  Testing showed that consumers using the new forms were better able to answer questions about a proposed loan and know whether they would be able to afford it, the bureau said.