While it might seem like nothing more than common sense, the Federal Reserve Board is soliciting “public comment” on a new lending regulation that would “require lenders to determine a borrower’s ability to repay a mortgage before making the loan and would establish minimum mortgage underwriting standards”[1]. The rule would apply to all consumer mortgages except home equity lines of credit, timeshares, reverse mortgages and temporary loans. Ability to repay would be determined by “considering and verifying” crucial factors like income and assets.
However, this method of determining eligibility could rule out lending in rural and underserved areas, according to the central bank[2]. In order to preserve access to credit in these areas, borrowers would be allowed – in such areas in particular – to make a balloon-payment qualified mortgage. This would allow banks to “hedge against interest rate risk for loans held in portfolio.” The Fed also wishes to allow creditors to refinance non-standard mortgages into more stable loans with lower monthly payments.
The proposed legislation is open for public comment until July 22, 2011. It will then pass on to the Consumer Financial Protection Bureau, which will open its doors on July 21, 2011.
Do you think that these regulations are too stringent? Not stringent enough?
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[1] http://www.dsnews.com/articles/fed-proposes-rule-on-borrowers-ability-to-repay-2011-04-19
[2] http://www.housingwire.com/2011/04/19/fed-opens-comment-period-for-reg-z-ability-to-repay-requirement
Yes We’ve been screaming for Gov intervention since this whole debacle began but they have yet to get it right. We absolutely Must have standards in place moving forward or what is to stop the same people-Who the gov just had to save-from doing the same thing over again. They didn’t loss, they still got their fat bonus checks. You don’t think they wouldn’t create new similar ways to manipulate the market in order to line their pockets at the expense of the American people.
Yes put these guidelines in place, make exceptions where necessary, whatever it takes to insure there is no repeat of the past.