The Department of Housing and Urban Development’s efforts to help borrowers understand what costs they are getting into (see http://blog.fineaustinliving.com/shopping-for-a-mortgage-should-get-easier-in-austin), is just one example of the federal government’s primary target as the U.S. economy comes out of this recession.

Consumer Debt

It’s easy, of course, to blame the housing industry for the financial mess. And there’s no question, home buyers eager jump on the bubble bandwagon of rapidly rising home values took on loans they fundamentally could not afford, adding to the problem.

You probably have your own opinion about the government’s efforts to “modify” some of these loans, making them more affordable to those who carry them. You probably have your own feelings about the government bailing out the banks who made these loans, perhaps knowing that many wouldn’t be paid back.

But you should also be able to see that the government is trying to make sure it doesn’t happen again. The HUD Good Faith Estimate form is an example – the government is saying “protect the borrower” when it makes it harder for banks to hide real costs.

The credit card laws that go into effect in February also put consumer debt in their cross-hairs, aiming to eliminate some of the practices that keep credit card account holders in debt.

For example, card companies can no longer raise your interest rate on current balances if you are less than 60 days late on a payment. Also, after February, companies can’t charge a fee for going over a credit limit, unless the card holder has “opted in” to pay the charge for the convenience of being able to go over his or her limit.

NOTE: It will be important for you to pay attention to all your credit card mail – you might be required by your card company to opt in or opt out of various changes. Some card companies, knowing they can’t raise rates as often or for as many reasons as under the old laws, have raised rates now. You can opt in to the new rates, while you continue paying the old rate on current balances, or you can opt out, effectively canceling your card.

New regulations also call for parental permission for those under 21 to open new credit card accounts, and they also restrict the marketing credit card companies can do on college campuses. Lawmakers apparently understand that card companies want to get their claws into potential debt carriers while they are still young and impressionable.

Are these kinds of measures going to squeeze the credit of some who might not deserve to be squeezed? Perhaps. But it’s clear that the government views Americans’ willingness to go into large debt, or their irresponsibility with it – or both – as part of the financial problem.

And its solution is to take aim at that consumer debt.

Recommended Resources

Settlement Cost Booklet

HUD has published a pretty handy guide for home loan borrowers, titled “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet.” This 49-page booklet explains laws, procedures, costs, etc. associated with home loans. You can download this educational booklet at

http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement%20Booklet%20December%2015%20REVISED.pdf

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