Mortgage brokers and their customers will both have to be a bit more open with each other now that the state Department of Banking approved several new disclosure regulations.

Dan Egan, department spokesman, said the regulations apply to mortgages that come from businesses other than banks, otherwise known as "nonbank lenders."

The regulations went into effect this month.

"Banks have been doing a good job at making sure customers who took out loans or mortgages could pay them back, so these regulations are for the no-document loan," he said.

In a no-document loan, Egan said, the lender is "taking your word for it" that you can pay back a loan.

"These types of loans, however, are open to a certain amount of abuse on both sides," he said.

The new regulations, which Egan said the Department of Banking has been trying to pass for three years, calls for proof of income, as well as a one-page disclosure form that allows the borrowers to understand interest rates and the structure of their loans.

"There is a greater onus on the borrowers to show the (lender) their income and what they can afford, and a great onus on the lender to make sure the borrower understands the loan," Egan said, adding that a new level of "transparency is probably a good term for it."

Jim Keffalas, real estate broker for Keffalas Realty in Butler, who is on the board of directors of the state Realtors Association, said the new regulations are a "good thing."

"The mortgage brokerage industry has low barriers for entrance, and maybe we wouldn't have needed this if the high rate of mortgage defaults had not reared its head," he said, referring to the wave after wave of what are now called "toxic loans" that have led to millions of home foreclosures.

Many mortgage brokers or companies outside of the banking industry lent billions of dollars in mortgages to people who could not afford them, especially when the terms of the loan pushed up interest rates well beyond the low initial rates.

"To be frank, over the past few years, there were times that people got mortgages that I didn't think would," Keffalas said.

"It wasn't like that seven, eight, nine years ago. Those loans would not have been approved, so the new regulations are needed," he said, adding that initially some real estate sales could be hampered by buyers who cannot get a mortgage.

"But look at all the empty houses and what the government is having to spend on them. There's got to be a cure to this problem," Keffalas said.