Credit unions and other mortgage lenders would be required tohighlight portions of a mortgage agreement that could be costly forconsumers-such as adjustable rates and prepayment penalties-underregulations proposed by the Federal Reserve.
The proposed regulations, which are subject to public comments dueat the end of November, would require the annual percentage rate toinclude most fees and settlement costs and mandate that lendersshow how the consumer's APR compares with the rate offered toborrowers with excellent credit. On adjustable-rate mortgages,lenders would be required to tell consumers how much their monthlypayments might increase.

Lenders would be required to issue a one-page document, inquestion-and-answer format, outlining the risks.

“Consumers need the proper tools to determine whether aparticular mortgage loan is appropriate for their circumstances,”said Federal Reserve Chairman Ben Bernanke. “It is often said thata home is a family's most important asset, and it is the FederalReserve's responsibility to see that borrowers receive theinformation they need to protect that asset.”

Officials at CUNA and NAFCU said they are reviewing theproposals and would submit comment letters to the Fed. On similarissues in the past, the trades have focused on striking a balancebetween protecting consumers and not adding an undue regulatoryburden to credit unions.

The Fed also proposed decreasing incentives for puttingborrowers in more expensive loans. It would ban payments to amortgage broker or a loan officer based on the loan's interest rateor other terms. Also, brokers or loan officers would be banned fromsteering a consumer to loans not in their interest to increase thebroker's or officer's compensation.

The proposal also revamps disclosure rules on home equity linesof credit.

Lenders will have to give borrowers a one-page information sheetissued by the Fed, and within 72 hours of receiving theapplication, the lender would have to provide an estimate of thecosts that reflects “the specific terms of their creditplans.”

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