New Jersey Mortgage Regulation ……Are borrower better off now?

Have new regulations in residential mortgage financing become a problem or a solution to the mess we have experienced in the new jersey mortgage and housing market. First let us understand how and why we have the problem’s we have. Lose lending practices and the demand for a better return on mortgage back securities for wall street investors. An example of  theses loans;  some borrowers were able to purchase homes with straight 100 % financing or 80 / 20 loans. These loans flooded the marketplace. Some of these loans didn’t require a Borrower to verify any income and allowed seller to pay most of the closing costs associated with the home purchase. Government was well aware of these practices and as matter of fact encouraged it,  making  owning a home easier for everyone. This was fine with low nj mortgage rates and a housing market that was booming with values appreciating in some areas1-2 % a month.

So now lets fast forward housing reached its threshold and buyers stopped the mad rush to overbid on properties. Then values started dropping. Borrowers with the creative financing started having trouble keeping up with their mortgage obligation. Some tried to refinance to lower nj mortgage rates and found lower values meant no equity hence no refinance. These borrowers had no financial interest in the home and found it easy just to stop paying or walk away.

Here are some regulation change and what they are proposed to do. First we HVCC home valuation code of conduct. This new law disallows any lender, broker or originator to have any direct contact with an appraiser. All appraisals are to be ordered through management companies. This is to ensure the lender has no influence on the appraiser. Next is Truth in Lending, the lender cannot accept any fee other that the nominal credit report fee until the borrower receives the completed  truth in lending form in the mail..And finally the new good faith estimate and hud 1, and hud 1a or referred to as the closing statement. This is to ensure borrower that the estimate of closing fees is exactly the same at closing on the hud form as it was at time of application on the good faith.

Are these changes beneficial to home loan borrowers or just the governments way of fixing and over regulating a problem they help create.