Skip to comments.New mortgage lending rules to limit loan options [Obama's Plan: LESS FREEDOM FOR CONSUMER]
Posted on 01/10/2013 5:49:59 AM PST by SoFloFreeper
The Consumer Financial Protection Bureau is planning a Thursday morning announcement of new lending rules that it hopes will move the mortgage market toward a sustainable middle ground, somewhere in between the free-wheeling days of no-documentation loans and the current, restrictive environment.
For most borrowers, the rules will mean no more interest-only mortgages, no more loans where the principal due increases over time, no more loans that carry a balloon payment and no more loan terms of more than 30 years. In addition, would-be borrowers will be less likely to qualify for a mortgage unless their total debts account for no more than 43 percent of their monthly gross income.
These so-called qualified mortgages are expected to be embraced by lenders, because by following the criteria, they will have a better chance of shielding themselves from lawsuits from consumers whose loans go bad.
(Excerpt) Read more at my.chicagotribune.com ...
In the defense of banks, I don't think they really WANT to have loans go bad.....I think federal intervention to this extent is unwarranted.
Way to go Scott Brown. Thanks for giving Obamugabe more power.
back when I was taught about mortgage rules it was 28% of your income including your mortgage payment.
Could this possibly mean that borrowers who have NO chance in hell of being able to pay off the mortgage will no longer obtain said mortgages?
Wasn’t that free-wheeling “creative” lending the basic cause of the mortgage implosion?
This is a tacit admission that
Obama’s (previous) position that mortgages should be easy to qualify for
was a cause of the mortgage crisis.
back when I was taught about mortgage rules it was 28% of your income including your mortgage payment.
Funny you mentioned that. It is the way it used to be. Back in the early 2000’s my wife was a real estate agent. She came home one day and said the mortgage rules had been changed and they upped the number to 50%.
I said to her, “they are going to drain the apartment complexes and rental units and pump up the buyer pool. They are going to creat a bubble in house prices.”
As we learned, it was not really a house price bubble, but a credit bubble. And I was not quite smart enough to take advantage of it the way I should have, which would have been to buy as much as possible as soon as possible. Instead, I became a renter.
The good news is that when we left Seattle for Kentucky, in 2011, our rent had never gone up. We were paying $1,600 a month for a house valued at $525k with a several hundred dollar per month real estate tax bill alone.
Frankly, that was my first clue that the economy was being falsely pumped.
There’s no way the US government could qualify for a loan under these restrictions, so I guess that means our debt limit has to go DOWN, huh?
Ah, but its’ FReeper form to bitch and moan about “those” people who got mortgages they couldn’t afford, and also bitch and moan when rules are put into place to try to prevent that.
Per Stuart Varney reporting this morning on FoxNews, lenders would have to certify that prospective buyers can actually afford the new mortgage payments.
This whole housing loan fiasco for the last 2 decades has sounded like something out of satire or insanity.
We do live in an alternate reality. It sure isn’t the reality many of us now in our 60s grew up in.
“Per Stuart Varney reporting this morning on FoxNews, lenders would have to certify that prospective buyers can actually afford the new mortgage payments.”
Anyone with any knowledge of the industry would realize that is nothing new. It’s called underwriting!
As much as I hate regulation, this may not be a bad thing. Keep in mind that a lot of people who got these loans ran screaming to the press and anyone else who would listen how they got “suckered” or “hoodwinked” and didn’t realize that an “interest only loan” would require principal payments at some point. We live in a nation of children who can’t take responsibility for themselves.
Freedom and free markets. . . this is not really about protecting the consumer. It is about crushing community banks that work with borrowers on an indivudual basis to help them. They are eliminating the competition of their benefactor mega-banks so they can control what is going on in our economy from the top down - that is very, very bad. Most of the “consumer-friendly” regs put in place by the Obama commies usually have consequences that actually hurt consumers. In the long run this will too. There is a place for a temporary interest-only loan and a balloon loan. Obama is smothering community banks with regulation and government-created risk. The country, and the average financial consumer, will be far worse off when they run banks like mine out of business with garbage regs like these.
I am sure it was a huge relief to get out of Seattle, the “progressive DC” and get to Kentucky where there may still be a little truth around. Although they do not have nearly enough conservative Catholics.
As if it is the banks that had a choice in the matter.
We do live in an alternate reality. It sure isnt the reality many of us now in our 60s grew up in.
Our politicians are a like a deadbeat that has just discovered no one is stopping him from writing hot checks. We have full-blown economists with PhDs who have no idea what happens when you print money without restraint.
And a majority of Americans voted to give those clowns ever more political power. We are in free fall and we think we are OK because we haven't hit the ground yet.
I am sure it was a huge relief to get out of Seattle, the progressive DC and get to Kentucky...
In all seriousness, it is the reason I’m able to respond to the re-election of Obama with composure. I’d be at my wits end if I still lived in the ‘burbs of Seattle. I can live comfortably here on almost nothing. Very comfortably, actually. And that includes making the place a commune for all my adult children and their families.
In my day it was 28-36 and no more. Then it got to where there were no limits. Just lie until the ratios get down to where they need to be.
As for the principle increasing, they got rid of negative amortization loans decades ago.
Meanwhile, Hank Greenberg is suing the government for stock losses on AIG stock resulting from misguided meddling.
The regulations in question are an admission of failure. The actions of the zealot New York Attorney General discredited Mr Greenberg forcing lose of control. The company was taken over by Eurocrat apparatchiks that transformed the company such that it insured the tranches of bad loans securitized and peddled all over the world. The forceful takeover of AIG enabled the housing loan debacle.
Mr Spitzer’s reward was governor of New York. He pissed off old hank who spent a trifle of his billions learning and then exposing the fact that the Governor was in fact Client #9 of a Washington DC prostitution company
Yesterday AIG declined to become part of the suit. Old Hank in court is going to expose all the Eurocrat chicanery.
There will be no settlement....... he has more than enough money and is intent on exposing the whole Dodd Frank economic terror. Like eliot Spitzer, the day of the Queer from Massachuttes, Barney Frank, is coming
Does this apply to minorities? When banks follow credit worthy rules they get sued by DOJ because minorities don’t get as many loans.
I guaran-DAMN-tee you these same people will, in a year or two will be bitching to the press that the banks are racist or sexist or homophobic or WHATEVER because they don’t qualify for a loan.
It won’t matter to the moron media that the banks are following rules.
But you watch: special “executive orders” will be written for Obama Morons affected by Sandy, or buddies in Chicago......there are always exceptions for sycophants.
I am running a commune myself for my adult children, lol
As for the people who were screaming they were “suckered”, they were simply repeating what their leader (in the White House) and his Party were saying in numerous speeches.
Looking at it from the other side, if these new government dictated regulations towards real estate financing are so good, why not apply similar rules to auto loans, credit cards, student loans and all business loans?
I’m sure that the Attorney General will figure out a way to sue the banks for being racist in not giving loans to people who don’t qualify, if they are also a ‘protected victim group,’ and/or saying that the old rules that were enacted under Bill Clinton (forget the name of the senator and congressman the bill was named for) that started the entire mortgage problem with banks sued for ‘racial redlining’ of those who didn’t actaully qualify for mortages and being forced to issue them.
“In my day it was 28-36 and no more.”
Conventional, right? 28% PITI, 36% total monthly debt?
But FHA (govt guaranteed) was a higher (looser) ratio, with potential of financing in closing costs up to 103% LTV. I don’t remember the ratio.
Of course, FHA fell by the wayside when subprime loans kicked in.
Now, FHA is the new subprime with the same problems.
This is a terrible thing.
The Fed Gov't has gone from over-regulating in one direction to over-regulating in the other.
You say people can't take responsibility. The problem was the Government was MANDATING that banks push sub-primes. It was the Gov't who was responsible not the people.
Now the Gov't is saying banks should NOT push loans.
Give banks freedom to loan where they will. Banks don't like to lose money; it's Fed mandates that force them to do just that and the consumer suffers from tighter credit. Banks are best able to gauge what local conditions are like and how much money they can safely loan out and Fed regulations screw that up for banks AND the consumer.
These rules with a few exceptions will also apply to a seller financed transaction. Making an individual go thru the same hoops as a bank. That at least was how the initial draft was written. I need to see if that stayed in the final proposed rule.
Makes ya wonder how we survived with so many options available before this brain trust came into being.. CFSB
Cuomo make any comments on it yet?
typical big gubamint agency.. another unelected bureaucracy of Geithner replacements in training.