Lawmakers believe mortgage lenders deserve lawsuit protection

New regulations for distributing mortgages to hopeful borrowers is under debate, as some lawmakers want to ensure that lenders receive adequate legal protection.

A new regulation for distributing mortgages to borrowers is under debate, as lawmakers want lenders to receive the strongest possible legal protection, to ensure that certain reforms do not limit credit-worthy borrowers from receiving loans, according to Bloomberg Businessweek.

Representatives Shelley Moore Capito and Brad Sherman will send a letter to the Consumer Financial Protection Bureau (CFPB), asking for the lawsuit protection as the proposed regulation "aims to discourage lenders from making home loans with risky features and outlining steps they must take to verify borrowers’ finances," said the news source.

"We must ensure that reforms do not increase the cost of mortgage credit and therefore restrict credit-worthy borrowers from receiving mortgage loans," Capito said during the hearing by a House Financial Services subcommittee. "If there is not sufficient legal certainty for these loans, the cost of credit for borrowers could rise as well as fewer mortgages being issued."

In addition to possible changes in mortgage distribution, there are other reasons lenders should consider investing in loan management software. U.S. banks continued clearing backlogged inventory, after a nationwide mortgage abuse settlement, causing foreclosure starts to rise year-over-year in June for the second consecutive month, according to Realty Trac.

As reported by Reuters, overall foreclosure activity – including default notices and bank repossessions – declined for the 21st straight month, affecting 197,834 properties in June, a 3.96 percent decrease from May. 

Liability concerns had originally stalled foreclosure proceedings, but they are now expected to push forward in light of the $25 billion April settlement between banks and state attorneys general.

Even though the settlement is expected to help in foreclosure statuses, the housing market is still not completely recovered. An amortization calculator is another tool that lenders would be wise to invest in, to ensure that an accurate repayment plan is created for each individual borrower.