Will New Mortgage Rules Make It Harder to Get a Mortgage in 2014?
|Elizabeth Warren set up the CFPB and applauds the new rules|
Sen. Elizabeth Warren (D-Mass.) praised the Consumer Financial Protection Bureau's new slate of mortgage rules on Tuesday, saying they will curb shady practices aimed at "tricking and trapping people" into unaffordable loans.
The rules "will force mortgage lenders and servicers to compete by offering better rates and better customer service," Warren said on the Senate floor, adding, “Our whole economy will be safer. Not completely safe, but with a new cop on the beat, it will be safer.”
The CFPB is Warren's brainchild. President Barack Obama tapped her to help establish the agency after it was created by the 2010 Dodd-Frank financial reform law.
The rules, which take effect Friday, will bar a host of abusive practices in the mortgage lending, loan collection and foreclosure processes. Last year, major banks agreed to a multibillion-dollar settlement over such foreclosure improprieties as the use of fabricated documents and forged signatures to evict homeowners.
Under the CFPB rules, banks that collect loan payments will be barred from initiating a foreclosure until a borrower is at least 120 days delinquent on his or her loan. Lenders must also determine that borrowers have the ability to repay a mortgage before issuing a loan, and mortgage brokers will be prohibited from receiving kickbacks for steering customers into higher-cost loans.
"The CFPB’s new rules will prohibit this sort of under-the-table dealing and protect consumers from being tricked by people they think they can trust," Warren said.
Others are offering concerns that the already difficult mortgage market will become trickier to navigate under these rules than under the other Dodd-Frank regulations already in place. Under the new rules, banks will be restricted from making loans to those who "can't afford them." If lenders choose to make loans to those who don't qualify, they will open themselves up to additional legal risks in the event of default.
Many of the guidelines remain the same as they were in 2013. In most cases CFPB rules will merely make the proof more difficult for some borrowers. For those who count on tips, income from small businesses, and other more difficult to substantiate sources, the process may require more proof and take longer.
If you are planning to buy a home or investment property, and you need some help wading through the mortgage loan process, please call Bill Rayman to discuss the current mortgage climate. He will be happy to provide you with some clarity on your choices without cost or obligation.
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