Buy hyzaar: some audio thoughts from state Treasurer (and Attorney General candidate) Richard Cordray on the Fannie Mae/Freddie Mac situation (he offered in response to a question following a Statehouse press conference on Monday):

Cordray Audio on Fannie/Freddie

And here’s his released statement from yesterday:

Today’s approval of new mortgage lending rules by the Federal Reserve Board is a welcome move toward providing needed oversight and protection in the mortgage marketplace.  The changes, while far too late for many Ohioans who are losing or have already lost their homes, will become a significant factor in preventing future devastation.

We have a prevailing responsibility to assist those for whom these new rules come too late to help.  Some 200 Ohioans will be forced from their homes tomorrow, and 200 more the day after, highlighting the need for grassroots assistance such as that marshaled by the county Save Our Homes task forces and local housing counseling agencies.

Still needed is regulation of yield-spread premiums — cash rebates paid to third-party brokers as a kind of reward for funneling unsuspecting consumers into higher-rate loans.  Regulation of this undisclosed practice, which has proved itself to be an outrage in Ohio and elsewhere around the country, was also proposed among the rules approved today.Unfortunately, it has been left unaddressed at this point, showing that more work remains to be done.

The new rules for home mortgage loans, from the Federal Reserve Board, do the following:

• Prohibit a lender from making a loan without regard to borrowers’ ability to repay the loan from income and assets other than the home’s value.  A lender complies, in part, by assessing repayment ability based on the highest scheduled payment in the first seven years of the loan.To show that a lender violated this prohibition, a borrower does not need to demonstrate that it is part of a “pattern or practice.”
• Require creditors to verify the income and assets they rely upon to determine repayment ability.
• Ban any prepayment penalty if the payment can change in the initial four years.  For other higher-priced loans, a prepayment penalty period cannot last for more than two years.This rule is substantially more restrictive than originally proposed.
• Require creditors to establish escrow accounts for property taxes and homeowner’s insurance for all first-lien mortgage loans.

In addition to the rules governing higher-priced loans, the rules adopt the following protections for loans secured by a consumer’s principal dwelling, regardless of whether the loan is higher-priced:

• Creditors and mortgage brokers are prohibited from coercing a real estate appraiser to misstate a home’s value.
• Companies that service mortgage loans are prohibited from engaging in certain practices, such as pyramiding late fees.  In addition, servicers are required to credit consumers’ loan payments as of the date of receipt and provide a payoff statement within a reasonable time of request.

Creditors must provide a good faith estimate of the loan costs, including a schedule of payments, within three days after a consumer applies for any mortgage loan secured by a consumer’s principal dwelling, such as a home improvement loan or a loan to refinance an existing loan.  Currently, early cost estimates are only required for home-purchase loans.  Consumers cannot be charged any fee until after they receive the early disclosures, except a reasonable fee for obtaining the consumer’s credit history.