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We’re starting to see new regulations from the Consumer Financial Protection Bureau trying to regulate the mortgage market and prevent some of the outrageous abuses we saw leading up to the 2008 financial meltdown.
The government is establishing new rules for mortgages that will make it harder for some borrowers to qualify but that are designed to prevent the kind of risky lending that nearly caused the housing market to collapse during the financial crisis.
The Consumer Financial Protection Bureau on Thursday will roll out the first of several far-reaching changes to the nation’s mortgage market, limiting upfront fees and curtailing practices such as interest-only payments that can leave homeowners stuck with unsustainable loans. The agency also will set standards for how much income a consumer must have to obtain a mortgage.
This marks the first time the government has spelled out what constitutes a “qualified mortgage,” an effort to prevent the widespread toxic loans that hurt millions of Americans during the housing crisis.
Banks that offer qualified mortgages will be protected from lawsuits if they adhere to the criteria. The consumer agency hopes that will drive the entire industry to live by the tighter standards that have taken hold since the crisis, ensuring safer loans but potentially limiting the number of people who can qualify to buy a home.
This will make it harder for some people to qualify for mortgages, but that’s reality. There will be a phase-in period. I’m also curious to see how people in markets like New York react where prices are so high. But in the grand scheme of things these reforms were needed.
