Saturday, January 12, 2013

New Mortgage Qualification Rules

New rules are  being proposed by the Consumer Financial Protection Bureau (CFPB) that are likely to have impacts on the ability of buyers to obtain a mortgage.  The CFPB, created as a result of the financial reforms enacted by congress after the near financial collapse of 2008-2009, is setting out requirements that most banks (although not credit unions or "community banks") will have to follow to determine if prospective borrowers actually have the ability to repay their loan.

The most prominent feature of the new regulations is the requirement that the lender must determine that a borrowers total debt payments including their home mortgage, student loans, credit card payments, and child support not exceed 43% of their income.  There's a good itemization of other features in a Washington Post article.

Some of the new rules are likely to make it more difficult for prospective home buyers to secure a mortgage, especially in high cost markets like the Bay area.

It's too early to know what the actual effect on borrowing will be but one thing is almost certain -- the already cumbersome process some of the big bank lenders use today is likely to get even more convoluted, requiring more documentation, and will take even longer.

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