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Federal agency seeks to loosen Dodd-Frank rule for nonprofits

One of the biggest drivers of the recent U.S. foreclosure crisis, which appears to still be ongoing in Florida, was lenders giving mortgages to homebuyers without first making reasonably sure that the borrowers will be able to pay. This zeal to issue big mortgages soon left many people in homes they could no longer afford, triggering numerous foreclosures.

A major piece of legislation to come out of Congress in the wake of the foreclosure crisis and resulting economic recession is known as the Dodd-Frank Act. Among other things, this law attempts to regulate how banks approve customers for higher-priced mortgages. It generally requires lenders to make a reasonable, good faith determination that the borrower has the ability to repay any sort of loan secured by a dwelling -- that is, a mortgage.

However, the Consumer Financial Protection Bureau, which regulates banks, has proposed amending Regulation Z, which implements this portion of Dodd-Frank. According to its website, the CFPB wants to exempt “certain nonprofit creditors and certain homeownership stabilization programs” from investigating borrowers’ ability to pay. It appears that these programs have a different goal than for-profit banks.

Still, Dodd-Frank continues to require that most lenders avoid issuing mortgages to people who cannot afford them, a reckless business practice that nevertheless was all too common prior to the passage of this bill.

The effects of this and other unscrupulous practices continue to affect Florida residents. Those facing foreclosure may wish to consult with an attorney if they want to fight to keep their home.

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