http://online.wsj.com/article/BT-CO-20100625-711910.html The legislation, which Congress is likely to vote on next week, requires lenders for the first time to document borrowers' income and assets in order to verify that they can afford the loan. The bill bars lenders from paying side payments to brokers for steering borrowers into higher-cost loans. And it bans prepayment penalties on some... [more]
http://online.wsj.com/article/BT-CO-20100625-711910.html
The legislation, which Congress is likely to vote on next week, requires lenders for the first time to document borrowers' income and assets in order to verify that they can afford the loan.
The bill bars lenders from paying side payments to brokers for steering borrowers into higher-cost loans. And it bans prepayment penalties on some mortgages.
Beyond that, the bill seeks to encourage safer, more stable loans by penalizing lenders that make loans with risky features. Loans with negative amortization, balloon payments or with terms stretching beyond 30 years would require the lenders to retain 5% of the credit risk on their balance sheets. They also would be more vulnerable to borrower lawsuits.
Regulators have leeway in how they determine which loans qualify for the carve-out from the risk-retention rules, making it difficult to predict the impact on the market.
Just how the exempted loans are defined will have a huge impact on the market, bank lobbyists said. Independent mortgage lenders are likely to shun loans that don't qualify for the carve-out because they typically don't hold any loans on their books. And larger bank lenders will shy away from the non-exempted loans because they won't want to hold additional capital against them.
Mortgage lenders argue the regulators must set very precise standards for exempted loans. "The less specifics that we have, and the weaker the safe harbor, all that will do is raise costs to consumers," Courson said.
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Response by Sunday
about 16 years ago
Posts: 1607
Member since: Sep 2009
I wonder if the average home owner and future buyer is for or against these new rules.
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Response by Riversider
about 16 years ago
Posts: 13573
Member since: Apr 2009
That's easy, the seller does not care, and the buyer has no interest in whether the lender is doing a prudent loan. Who want to hear the word NO. Of course the buyer will argue otherwise when they can't handle the debt load.
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Response by Sunday
about 16 years ago
Posts: 1607
Member since: Sep 2009
Why would a seller not care? Smaller buyer pool (less demand) = lower sales price.
As for buyers, if you're one of the qualify buyers who can prove their income easily, then less competition means lower prices. Of course it would also mean slower price appreciation after purchase with a permanently smaller buyer pool. That's why I think it's interesting to see who's for or against it. Appreciation of housing prices is not a healthy way of building wealth for the country unless we plan to sell everything to foreigners and move to Mars.
I wonder if the average home owner and future buyer is for or against these new rules.
That's easy, the seller does not care, and the buyer has no interest in whether the lender is doing a prudent loan. Who want to hear the word NO. Of course the buyer will argue otherwise when they can't handle the debt load.
Why would a seller not care? Smaller buyer pool (less demand) = lower sales price.
As for buyers, if you're one of the qualify buyers who can prove their income easily, then less competition means lower prices. Of course it would also mean slower price appreciation after purchase with a permanently smaller buyer pool. That's why I think it's interesting to see who's for or against it. Appreciation of housing prices is not a healthy way of building wealth for the country unless we plan to sell everything to foreigners and move to Mars.