New federal mortgage rule aims to protect you from risky home loans

Your Home May Be Repossessed If You Do Not Keep Up Repayments On Your Mortgage by J Mark Dodds a shadow of my future self“While it’s good that the CFPB is going after some of the worst abuses in the mortgage market, we urge them to keep the pressure on to ensure all mortgages offered to consumers are fair and appropriate,” says Pamela Banks, senior policy counsel for Consumers Union.

Video: New Mortgage Regulations Require Proof of Ability to Repay

New Mortgage Rules To Protect Buyers & Lenders

“We’ve seen neighborhoods that have been very much negatively impacted because of mortgage foreclosures, and the tragedy in this is that in many of these cases it didn’t have to happen,” said Sen. Ben Cardin, D-Maryland. “Individuals in our community were steered into subprime products that they shouldn’t have been.”

New Mortgage Rule Aims to Protect Borrowers

The U.S. government states that a new federal rule on home lending, effective in 2014, will give consumers greater protection against risky mortgages. However, it is not immediately expected to make financing easier to obtain. According to the Consumer Financial Protection Bureau, the newly adopted rule lays out what lenders must do to ensure that borrowers can afford their mortgages. One of its main goals is to protect against the kind of underwriting that triggered the housing bust, when many borrowers took on risky loans they did not understand and had little to no hope of repaying. CFPB director Richard Cordray describes the new “common sense” rule as one that “ensures responsible borrowers get responsible loans.” Consumer groups, though, complain that it affords lenders too much protection and fails to include adequate provisions to safeguard low-income borrowers. Alys Cohen of the National Consumer Law Center laments that it “invites abusive lending.” Under the new rule, a qualified mortgage cannot contain such “risky” features as terms that exceed 30 years or negative-amortization payments where the principal amount increases. In addition, qualified mortgages cannot carry fees and points in excess of 3 percent of the loan; and they cannot be issued to borrowers who, once the mortgage is factored in, carry debt-to-income ratios above 43 percent. Observers say the guidelines will make it tougher for certain borrowers — including wealthier buyers seeking interest-only financing and subprime buyers with poor credit — to get loans. Web Link

Mortgage Protection, Gun Control & Pension Changes Amongst New Laws for 2013

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New Mortgage Rules Protect Consumers

New rules from the federal government aim to protect consumers from loans they can’t afford. Do they offer enough safeguards or will they make it too hard to get a loan? An expert weighs in on Chicago Tonight at 7:00 pm. Learn more about the Ability-to-Repay rule in the fact sheet below.

Consumer Financial Protection Bureau Issues Rule to Protect Consumers from Irresponsible Mortgage Lending

Cap on how much income can go toward debt: Qualified Mortgages generally will be provided to people who have debt-to-income ratios less than or equal to 43 percent. This requirement helps ensure consumers are only getting what they can likely afford. Before the crisis, many consumers took on mortgages that raised their debt levels so high that it was nearly impossible for them to repay the mortgage considering all their financial obligations. For a temporary, transitional period, loans that do not have a 43 percent debt-to-income ratio but meet government affordability or other standards − such as that they are eligible for purchase by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac) − will be considered Qualified Mortgages.

Daily Kos: Consumer Financial Protection Bureau Issues Ability

I know it’s well-intentioned. But here’s what my bank has told me — several different loan officers: Because of this regulation, the ONLY thing they can look at is my debt-to-income ratio. (And they won’t count my income at all, because it’s adjunct teaching, freelance writing, and other stuff that isn’t a guaranteed paycheck.) They can’t look at the fact that I’ve been paying them, at the higher rate / higher monthly payment, by autopay, for more than six years. They can’t look at my credit rating. They can’t look at whether I have enough money socked away to repay the mortgage three times over. (One would think that would influence “Ability to Repay,” but no, it doesn’t count.) None of that counts at all, because I don’t have enough solid guaranteed income per month to meet the 43% ratio.

New rules will protect mortgage borrowers

They include several exceptions aimed at ensuring a smooth phase-in and protecting access to credit for underserved groups. For example, the strict cap on how much debt consumers may take on will not apply immediately. Loans that meet separate federal standards also would be permitted for the first seven years.

Consumer Mortgage Protection

ABJ – January 10 – A new rule on home loan lending by the federal government is designed to provide consumers more protection against risky mortgages. That said, it won’t make the process of qualifying for a mortgage any easier from a financial point of view. The Consumer Financial Protection Bureau adopted the rule. The rule is meant to guard against lending practices that preceded the housing bust, when many borrowers took on risky loans they didn’t understand and could not afford. A wave of foreclosures followed, helping to drive down home prices more than 30 per cent since 2006.

Consumer Financial Protection Agency New Mortgage Rules

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