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It’s back to basics for the mortgage market in 2014


This month, new consumer protections for homebuyers are going to take effect. The Ability-to-Repay and Qualified Mortgage rule is a “back-to-basics” approach to mortgage lending that will protect consumers from the debt trap of a mortgage they can’t afford. Starting January 10, lenders will be required to make a reasonable, good-faith determination that a borrower can afford to repay a mortgage. That’s a common-sense policy that responsible lenders have already been following for decades – and this month it will be the law.

The Ability-to-Repay and Qualified Mortgage rule is an important development for the mortgage market, and as the effective date gets closer, there have been rumors about what the rule does and does not do. Today, we are releasing a fact vs. fiction guide to help dispel some of the most common misconceptions about what this new rule actually means for consumers.

  • JF

    Doesn’t make sense, why are we only looking at dti? Should a lower ltv justify a higher ltv? Most borrowers run into trouble are those with little or no equity.

    • Dave in Upstate NY

      dti? ltv? I have litigated consumer law for nearly 40 years. If I have to dumpster dive and guess what those acronyms might communicate if they were common language,then the public is completely lost.

      • Brenda

        debt to income and loan to value

  • JF

    You have a serious problem on your hands. If you make the rules too restrictive, which I believe they currently are, the people you intend to help will be the ones being harm by it. Let’s call them the financially disadvantaged, folks who lacked income or assets. There are loopholes smart lenders can exploit to skirt around. And the more you tried to patch the more you’ll hurt the poor. The people you didn’t intend to help will stand to benefit, the rich

  • Kate McQueen

    I really feel that this is another unnecessary government interference in the mortgage/housing market. This is a big part of what caused the problem in the first place. However I will hope that some good will come of it, in spite of my skepticism.

  • Ardy S

    If you really want to enforce a borrower’s ability to repay a mortgage note, how about qualifying their income based on their take-home (net) pay and not the pre-taxed gross pay. This always baffled me.

  • Ernest Martinson

    If, for decades, responsible lenders have made a reasonable determination as to whether borrowers can afford a mortgage, I assume that the new law will only force irresponsible lenders to make good-faith determinations. But given the fact that laws are already too numerous to be universally enforced short of a police state, what if a lender does not make a good-faith effort to determine a borrower’s ability? Will the lender then be responsible for her bad loan? Or will she have already passed the bad mortgage on to be securitized by a Government Sponsored Enterprise (GSE) such as Fannie Mae or Freddie Mac?

  • TjmTxTTU

    I’m curious to know if posters are consumers, industry professionals, members of the media, etc.

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