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What You Need to Know About the Garn-St. Germain Depository Institutions Act
If you are thinking about becoming a loan officer at a Kansas City mortgage company, you will need to be knowledgeable about consumers’ rights in relation to property financing. There are many regulations, acts and laws that loan officers must know when working in the mortgage industry.
The Garn-St. Germain Depository Institutions Act is one piece of legislation that is particularly important to be aware of if you are planning on working for a Kansas City mortgage company. In having the knowledge, you will be better able to explain what it does to customers and how it affects them.
What is the Garn-St. Germain Depository Institutions Act?
The Garn-St. Germain Depository Institutions Act was enacted in 1982 by Congress and was designed to revive the housing industry. It sought to do so by improving the financial stability of home mortgage lending institutions and ensuring the availability of home mortgages.
It was also meant to make savings and loan institutions more competitive as well as homeownership more accessible. Under this act, these organizations were deregulated and banks were allowed to provide more flexible financing options such as adjustable rate mortgages to consumers.
The Effect of the Act on Consumers
The effects of the Garn-St. Germain Depository Institutions Act have been widely criticized. Some critics claim it contributed negatively to the condition of the U.S. economy in the 1980s. However, there was a beneficial side for borrowers.
The biggest and most significant consumer change from this act was the ability to transfer real estate property into their personal trust without activating the due-on-sale clause. The due-on-sale clause permits lenders to foreclose on a current loan or property when it is transferred to someone else. The act enabled the use of trusts to pass property to heirs and minors.
When a relative inherits and occupies a residence, the Garn-St. Germain Act bans the lender from enforcing the due-on-sale clause. It also made it possible for some borrowers to transfer their property to a personal trust and save their home from foreclosure if ownership was not transferred to someone else.