Feds Want to Axe Even More Homeowner Protections

At the height of a seemingly neverending foreclosure crisis, the Fed has apparently decided homeowners have too many rights. In a move that has outraged civil rights groups, defense attorneys and consumer advocacy groups, they've proposed to amend the Truth in Lending Act, making it harder for homeowners to defend themselves against bad loans and careless paperwork.

Groups like the NAACP and the National Consumer Law Center jointly drafted a letter expressing their disdain for the motion:

"At the depths of the worst foreclosure crisis since the Great Depression, we are surprised that the Fed has proposed rules that would eviscerate the primary protection homeowners currently have to escape abusive loans and avoid foreclosure: the extended right of rescission."

For almost a half-century, a clause in the Truth in Lending Act has allowed a three-year grace period for homeowners to cancel or rescind illegal loans, if they weren't given the full story about the loan at closure. Under the protection of the clause, they are able or refinance in lieu of losing their homes. The Fed's proposal would alter this to require homeowners to pay back the entirety of the loan before they're unleashed from the lender's lien –- a sure path to foreclosure.

"This, of course, would be almost impossible for most consumers to do because they can't come up with the money until they get out of the loan. And they can't get out of the loan until the lien is released," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America. "None of us are quite sure what purpose is being served by this proposal or what prompted it."

The Fed has justified its action in the Federal Register, saying the change would "ensure a clearer and more equitable process for resolving rescission claims raised in court proceedings" and reflects what most courts already require. A spokesperson at AARP, which has helped homeowners use the clause for decades, has called that "egregious." Read more at McClatchy.


AlterNet / By Julianne Escobedo Shepherd

Posted at December 2, 2010, 4:00am

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