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New rules; banks are legally responsible for ensuring that borrowers have an “ability to repay” a mortgage.

Home - by - January 12, 2013 - 21:00 America/New_York - 21 Comments

NEW YORK (The Street) – The Consumer Finance Protection Bureau is set to unveil on Thursday new rules for the mortgage market designed to protect borrowers from abusive lending practices that characterized the boom years.

Under the new rules, banks are legally responsible for ensuring that borrowers have an “ability to repay” a mortgage.

Banks that make a”qualified mortgage”, as defined by the final rule, are assumed to have met the ability- to- repay criteria and will receive legal protection from lawsuits. The degree of legal protection will be greater in the case of prime loans and lower in the case of high-priced sub-prime loans.

Qualified mortgages cannot have risky loan features such as interest-only payments, or negative amortization features or terms that exceed 30 years. There will also be no excessive upfront points or fees.

To ensure that borrowers have an ability to repay the loan, banks will have to verify that consumers’ total monthly debt does not exceed 43% of his or her pre-tax income.

Loans that meet the affordability standard of Fannie MaeFreddie Mac and the FHA also will be considered a qualified mortgage, though this standard is likely to phased out once the GSEs are out of conservatorship or at the end of seven years, whichever is earlier.

The rules are to take effect in January 2014.

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» 21 Comments

  1. Diann

    January 12th, 2013

    Until they are once again accused of being racist. Then, it’ll be back to, “Sure Lequitia, you can purchase that seventy-five thousand dollar house when you only earn six hundred and ninety two dollars a month.”

    Noteworthy Comment Thumb up +11

     
  2. Left Coast Dan

    January 12th, 2013

    Yeah, this will destroy the quota system. Gov’t will have to step in and guarantee everything, then it will be ok. That should do it. Should put us over the brink.

    Does anyone really believe GSEs are going to lose gov’t support?

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  3. Corona

    January 12th, 2013

    Oh…NOW they give a shit. I swear to God this government is like a walking coma.

    Noteworthy Comment Thumb up +13

     
  4. Bad Brad

    January 12th, 2013

    There goes the housing market. I don’t see a lot of money moving in the real estate market. To bad nobody in this administration ever had to work for a living in the private sector. These guys couldn’t run a Lemon Aide stand.

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  5. jclady

    January 12th, 2013

    Wow — what a novel concept! And a major SCREW YOU to Jimmy and Bill.

    When we bought our first house, we had to put down 20% to avoid mortgage insurance (10% downpayment required the purchase of insurance which was a rip-off). Our total payment couldn’t exceed 25% of gross monthly income and all potential debt (credit card limits) was taken into consideration.

    Fast forward to when we bought our current home (1994) and the bar had been raised to 33% of gross monthly income and the lender didn’t even ask about credit card limits.

    A few years later, our neighborhood started being decimated by “interest only” loans.

    Another example of the liberal concept of “everybody deserves (fill in the blank)” that has led to the downfall of our economy.

    Glad to see just a tad of responsibility being attached to a mortgage!

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  6. Bad Brad

    January 12th, 2013

    jclady:
    “The banks are legally responsible”. Meaning you default, you can probably sue your bank because they didn’t do their job. This sounds like a huge disaster to me with real bad implications. If I were a bank, I would not be doing many mortgages.

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  7. jclady

    January 12th, 2013

    @Bad Brad — my point is that this DOES put the responsibility back on the banks for making sure any mortgage is secure.

    To me, this is a good thing. Only truly qualified borrowers will get a mortgage.

    Why is this bad?

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  8. An apartment

    January 12th, 2013

    Everyone does not have to have their own home.
    What’s wrong with a small apartment, for those low income people.

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  9. Bad Brad

    January 12th, 2013

    jclady, I think it was designed and written so homeowners that default on their mortgage can sue the bank, keep the home, and ultimately you and I pay for it.
    This wouldn’t be such a big deal if we had a president that believed in Free Market principles so we could get the economy rolling again. He’s such a freaken socialist he should just come out and admit it. Sadly I know things are only going to get worse.

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  10. sig94

    January 12th, 2013

    Sure, a few trillion horses have run out of the barn and now they lock the doors. A**oles.

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  11. mickey_moussaoui

    January 12th, 2013

    The entire morgage fiasco was planned by Democrats years ago. They did this intentionallly. It all started with Clintons CRA act. All of this was planned to happen quicker but Bush beat Gore. They (with the help of the BIG banks) flooded the global market with junk bonds and made a killing.Who got bailed out first? Big banks. Who is ammune from Obama? Big banks. I’ll make a prediction right now: After Obama is done with his term he will be a major player in the UN an will make millions of dollars from it. Big banks/ Big oil. One world order …and democrats are front and center.

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  12. jclady

    January 12th, 2013

    @Bad Brad — you have encouraged me to re-read the post.

    What jumps out at me is “consumers’ total monthly debt does not exceed 43% of his or her pre-tax income”.

    I agree with you that this is a disaster in the making.

    Thank you!

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  13. Bad Brad

    January 12th, 2013

    Thanks jclady. I’ve finally gotten to the point of realization that any legislation that comes out of this administration is going to be all about wealth re distribution.

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  14. OBAMA

    January 12th, 2013

    Is the Black Robbing Hood

    Thumb up +5

     
  15. Mr.Gates

    January 12th, 2013

    If they haven’t done it already, they will be doing affirmative action for credit ratings. The banks won’t know who really has a good rating, because racial points will be added to the credit score. We’re going to have another orchestrated mortgage meltdown because the first one didn’t totally kill the economy.

    When Clinton signed his steroidal treatment of the CRA, Frances Fox Piven (“Cloward–Piven strategy”) was in attendance.

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  16. Nutjob

    January 12th, 2013

    Wonder if by chance its called the Mortgage Reparations Act.

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  17. Tortillapete

    January 12th, 2013

    F*ck so-called poor people – they deserve their fate

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  18. KF

    January 12th, 2013

    @Nr. Gates, that leathery old communist hag was there when he signed the “motor voter” law too.

    What makes people like that so bitter and so dedicated to destruction ?

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  19. Carlos The Jackal

    January 12th, 2013

    Keep in mind that the ultimate goal is no private ownership of real estate. It’s one of the main tenets of communism.

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  20. Bad Brad

    January 12th, 2013

    Tortillapete:
    “F*ck so-called poor people – they deserve their fate”

    That’s pretty harsh. There’s going to be a whole shit load more poor here real soon. Not by their doing. It’s hard not to have compassion when you government takes every logical step they can to destroy the economy. I think were caught in the middle of some mad assholes social experiment.

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  21. Mr. Pinko

    January 12th, 2013

    Now can we pass a law for government to be fiscally responsible?

    Thumb up +9