In an effort to curb fraud and eliminate scams, State and Federal regulators are moving swiftly to reform the mortgage, debt relief and loan modification industries.  As the Mortgage Reform and Anti-Predatory Lending Act continue to make their way through Congress, it is clear this potential mortgage lending and settlement legislation could be just the beginning of an onslaught of future regulatory reform lawmakers will use to help protect consumers even more aggressively. The bill would fundamentally change the home lending market, placing tighter restrictions on nonprime mortgage lending. Perhaps more importantly, it would require mortgage lenders to establish what the bill calls a “duty of care” in proving borrowers could repay a loan and that mortgage refinancing gave them a net tangible benefit.

At the same time, banking and mortgage industry regulators are feeling much more empowered under the Obama administration than they were during the previous one. More stringent regulatory exams, a rising number of enforcement actions and the growing number of financial institution closings during the first quarter of this year are evidence of this fact.

These new rules are very different from those of previous years that required a simple update to a loan document or disclosure. Instead, these changes will demand mortgage lenders change the way they do business, revising and improving operational and compliance risk management processes entirely.  The myriad of federal and state anti-predatory lending laws are one subset of consumer-focused regulatory requirements lenders must comply with, but they present some of the most confusing and complex compliance changes facing mortgage relief companies and lenders.

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