US Consumer Financial Protection Bureau to announce new lending rules today
10 Jan 2013
The US Consumer Financial Protection Bureau has planned to announce new lending rules today aimed at moving the mortgage market towards a position, between the liberal no-documentation loans regime of the past and the current, restrictive environment.
For most borrowers, the rules would mean no more interest-only mortgages, no more loans where the principal due increased over time, no more loans that came with a balloon payment and no more loan terms of over 30 years.
Additionally, would-be borrowers would be less likely to qualify for a mortgage unless their total debts accounted for no more than 43 per cent of their monthly gross income.
These so-called qualified mortgages are expected to be embraced by all lenders, as by following the criteria they would have a better chance of getting protection from lawsuits from consumers whose loans went bad.
The provisions of the Ability-to-Repay rule, would closely follow the lines of protections called for in 2010's Dodd-Frank legislation that would come into effect in January 2014. CFPB director Richard Cordray, is expected to detail the regulations at a public hearing today in Baltimore.
The Chicago Tribune quoted a senior official of the consumer protection bureau, the agency charged with implementing the new mortgage requirements, as saying that the lending standards were not much different than the guidelines currently in place. While the rules might ease uncertainty among lenders who had worried about the scope of the regulations, he said, it could lead to additional anxiety for consumers trying to qualify for a home loan.
