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As the housing market continues to stabilize, consumers need more protection when they apply for a home mortgage loan, whether it’s to finance the purchase of a home or refinance an existing mortgage loan.

That’s the conclusion of the Federal Reserve, and the reason the Fed is now preparing new consumer-protection amendments to the frequently changed Regulation Z. Generally, this regulation mandates detailed disclosures by banks or other lending institutions in the area of home loans, along with other requirements.

The most serious collapse in the housing and mortgage markets in many decades was primarily caused by homebuyers who didn’t have sufficient information about the mortgage they applied for and, therefore, took a mortgage they could not afford. And, of course, lenders and mortgage brokers who urged consumers to take these high-risk loans must take much of the blame.

“Consumers need the proper tools to determine whether a particular mortgage loan is appropriate for their circumstances,” Fed chairman Ben Bernanke stated in a news release. “It’s often said that a home is a family’s most important asset, and it’s our responsibility to see that borrowers receive the information they need to protect that asset.”

Recently implemented rules require lenders to provide borrowers with an initial truth-in-lending mortgage cost disclosure within three business days of the application. Until the borrower receives the initial disclosure, lenders can’t collect any fees except for the cost of a credit check. Previously, lenders and brokers collected appraisal, credit and other charges at the beginning of the application process.

Also, lenders must provide borrowers with a final truth-in-lending disclosure statement by three business days before the scheduled closing of the transaction. The lender can’t close the mortgage loan until at least seven days after the applicant receives the initial disclosure statement, thus providing time for the borrower to read and consider the figures and overall transaction.

For more information, visit: www.federalreserve.gov.

Find out more: FHA-HAMP

The new FHA-Making Home Affordable Loan Modification Program (FHA-HAMP) was recently implemented by the Department of Housing and Urban Development and the Federal Housing Administration. The program will be a big help for struggling homeowners, significantly reducing their monthly mortgage payments and keeping the home they worked so hard to purchase.

“This is a tool the federal government is providing to help homeowners avoid foreclosure by making mortgage payments more affordable,” said HUD Secretary Shaun Donovan. “These changes expand the Obama administration’s Making Home Affordable Modification Program to include FHA borrowers.”

The action was supported by the National Association of Realtors. “Until foreclosures have been significantly reduced and housing inventory reaches a more normal level, there can be no true housing recovery,” said NAR President Charles McMillan. “... The actions taken over the past several months are beginning to help stabilize the housing market.”

Jim Woodard writes for Creators News Service.