Regulation

The home loan industry now has to adapt to new mortgage rules that offer borrowers much needed protection against lender abuses and reckless lending standards. But the changes may not please all borrowers.

Some of the new mortgage rules will influence qualification requirements and the types of mortgages that borrowers get. The regulations, drawn up in 2013 by the Consumer Financial Protection Bureau, are now in effect.

The gist of one of the main rules is simple: Lenders will be required to ensure that borrowers have the ability to repay their mortgages. In return, lenders will be protected from borrower lawsuits so long as they issue “safe” mortgages that follow guidelines.

These safe mortgages are what the CFPB calls “qualified mortgages.” As defined by the CFPB, only 12.8% of new mortgages in 2012 didn’t meet the “qualified mortgage” standard, according to real estate data provider CoreLogic.

The new […]

Mortgage lenders will soon have to work under stricter regulations after passage of the federal government’s Ability to Repay rule, designed to reign in loose lending standards that officials blame for contributing to the Great Recession.

Ability to Repay is set to go into effect on Jan. 10. The regulation, promoted by the Consumer Finance Protection Bureau, is written to deter what the government calls “risky features,” such as loans allowing for interest-only payments or negative amortization, a term that refers to a payment schedule in which a borrower’s outstanding debt can increase even while payments are made.

The new standards also do not generally allow for points or fees charged to a borrower to add up to more than 3 percent of the loan amount.

Home loans that meet the new standards will be dubbed “qualified mortgages.” The rule does not always forbid lenders from issuing […]

Mortgage reform is kicking in on Jan. 10, bringing significant changes to home loan financing.

The new rules were written by the Consumer Financial Protection Bureau to protect homebuyers from risky mortgages like the ones that led so many homeowners into foreclosure in recent years. The rules also protect investors from buying shoddy mortgage-backed investments.

The downside for consumers is that the rules make it harder for some people to qualify for a home loan. So, if you’re shopping for a mortgage or refinancing right now, it’s a good idea to close your loan before the end of the year.

In fact, though, many banks and mortgage lenders already are playing by the new rules.

Better borrowers

The Ability to Repay Rule requires lenders to evaluate your financial fitness to repay a loan, even if it’s an adjustable-rate mortgage with low […]

In his State of the Union address, President Obama said overlapping regulations were keeping “responsible young families from buying their first home.” He called for change: “Let’s streamline the process, and help our economy grow.” Banking regulators apparently agree, and by the end of summer may propose new rules to simplify the mortgage market.

Bloomberg News reports that by the end of August, regulators will release a “softer” version of rules overseeing how banks finance mortgages. The Dodd-Frank financial reform bill tasked regulators with writing rules that would force Wall Street to keep some skin in the game when they bundle mortgages into securities. Rather than letting banks pass all of the risk on to investors who buy the securities, the bill said banks must keep 5 percent of the deals on their own books.

In 2011, regulators released their preliminary proposal for defining the clunkily-named “Qualified […]