The financial reform law focuses primarily on the regulation of banks, hedge funds, insurers, stockbrokers and lenders. But some of the provisions will have a direct impact on consumers. People who apply for mortgages will benefit from several new consumer protections and disclosures that should help avoid unexpected rate hikes. Under the new law:

• Lenders must verify the income and assets of all borrowers and must determine whether a consumer is able to repay the loan over its full term. This will be particularly helpful for people considering interest-only loans with low payments for the first few years, followed by much higher payments when they begin to pay back the principal, too.
• Lenders must tell people with adjustable-rate loans the maximum they could end up paying. If you have a hybrid adjustable loan (such as a 5-1 ARM, with the initial rate fixed for five years, then adjusting annually after that), you must be alerted six months before the interest rate resets and provided with the formula used to recalculate the rate and an estimate of the new payment.
• Lenders can no longer offer financial incentives for enticing borrowers to take out more-expensive loans.
• Prepayment penalties are prohibited on most mortgages.