Federal proposal would toughen debt restrictions on mortgages Ben Margot/AP - A home is seen for sale Tuesday, May 31, 2011, in Alameda, Calif. Smaller Text Larger Text Text Size Print E-mail Reprints By Dina ElBoghdady, Wednesday, June 8, 12:59 PM Consumer borrowing is so rampant in America that most people who took out a mortgage last year to buy a home ended up spending more than a third of... [more]
Federal proposal would toughen debt restrictions on mortgages
Ben Margot/AP - A home is seen for sale Tuesday, May 31, 2011, in Alameda, Calif.
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By Dina ElBoghdady, Wednesday, June 8, 12:59 PM
Consumer borrowing is so rampant in America that most people who took out a mortgage last year to buy a home ended up spending more than a third of their income to pay that loan and other debts.
Now, a federal proposal would target these borrowers by making it tougher for them to get the cheapest mortgages. The initiative is part of a broader measure that aims to prevent another foreclosure crisis and could confront borrowers who do not meet certain conditions with higher interest rates and fees.
While the down payment condition has captured the public spotlight since the government unveiled its plan in March, experts who track the housing industry say the proposed debt limits could be just as onerous for borrowers.
“The debt limits are far and away the most binding constraint,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s probably the one thing that will knock the largest number of borrowers out of the market by keeping them from getting the most favorable rates.”
Nearly three out of every five U.S. borrowers who bought homes last year would not have met the proposed restriction on total debt, according to an analysis by mortgage research firm CoreLogic.
http://www.washingtonpost.com/business/economy/federal-proposal-would-toughen-debt-restrictions-on-mortgages/2011/05/05/AGIEh9LH_story.html?hpid=z1[less]
Response by Riversider
almost 15 years ago
Posts: 13573
Member since: Apr 2009
These rules make all the sense in the world for mortgages that put tax payer money at risk, but for private mortgages this makes no sense. For private mortgages the rules should focus on disclosure and a know your customer rule that the lender would be subject to(the same standard stock brokers and financial advisers are currently held to)
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Response by Sunday
almost 15 years ago
Posts: 1607
Member since: Sep 2009
What private mortgages? The other <10% of mortgages that are not backed by the government?
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Response by Riversider
almost 15 years ago
Posts: 13573
Member since: Apr 2009
This is temporal. Private mortgages will come back once everyone knows what the rules are and what role gov't is staking out for itself. Wall Street is busy working on mortgages 2.0.
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Response by Sunday
almost 15 years ago
Posts: 1607
Member since: Sep 2009
It's permanent until it's not. The question is "when?" Another year? 3 years? 5 year? 10 year?
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Response by Socialist
almost 15 years ago
Posts: 2261
Member since: Feb 2010
private mortgages are a thing of the past.
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Response by Socialist
almost 15 years ago
Posts: 2261
Member since: Feb 2010
especially in the jumbo loan market.
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Response by NYRENewbie
almost 15 years ago
Posts: 591
Member since: Mar 2008
So, let me understand this correctly. Those in the biggest bind to be able to afford a mortgage should be charged at a higher interest rate to make it even more difficult? Does that sound reasonable?
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Response by Socialist
almost 15 years ago
Posts: 2261
Member since: Feb 2010
Wall St. will not want to make mortages anymore because with Dodd Frank, they can't get rich anymore giving predatory loans to black people.
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Response by huntersburg
almost 15 years ago
Posts: 11329
Member since: Nov 2010
Did Dodd ever account for the favorable mortages and other special treatment he received from the industry?
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Response by Riversider
almost 15 years ago
Posts: 13573
Member since: Apr 2009
NYRENewbie.
This is just another way of saying, the least credit worthy borrowers should pay a higher rate. On the flip side if you were lending or investing in a mortgage, would you not demand a higher return if the risk were higher?
It makes sense, someone with perfect credit and the best resources should get the best rate. There's close to zero rate of default for this borrower.
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Response by Socialist
almost 15 years ago
Posts: 2261
Member since: Feb 2010
"the least credit worthy borrowers should pay a higher rate..."
Which is a great way to make their mortage as unaffordable as possible, thereby increasing their chances of defaulting.
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Response by Socialist
almost 15 years ago
Posts: 2261
Member since: Feb 2010
if someone is truly not a credit worthy borrower, maybe they should not get the mortgage in the first place.
These rules make all the sense in the world for mortgages that put tax payer money at risk, but for private mortgages this makes no sense. For private mortgages the rules should focus on disclosure and a know your customer rule that the lender would be subject to(the same standard stock brokers and financial advisers are currently held to)
What private mortgages? The other <10% of mortgages that are not backed by the government?
This is temporal. Private mortgages will come back once everyone knows what the rules are and what role gov't is staking out for itself. Wall Street is busy working on mortgages 2.0.
It's permanent until it's not. The question is "when?" Another year? 3 years? 5 year? 10 year?
private mortgages are a thing of the past.
especially in the jumbo loan market.
So, let me understand this correctly. Those in the biggest bind to be able to afford a mortgage should be charged at a higher interest rate to make it even more difficult? Does that sound reasonable?
Wall St. will not want to make mortages anymore because with Dodd Frank, they can't get rich anymore giving predatory loans to black people.
Did Dodd ever account for the favorable mortages and other special treatment he received from the industry?
NYRENewbie.
This is just another way of saying, the least credit worthy borrowers should pay a higher rate. On the flip side if you were lending or investing in a mortgage, would you not demand a higher return if the risk were higher?
It makes sense, someone with perfect credit and the best resources should get the best rate. There's close to zero rate of default for this borrower.
"the least credit worthy borrowers should pay a higher rate..."
Which is a great way to make their mortage as unaffordable as possible, thereby increasing their chances of defaulting.
if someone is truly not a credit worthy borrower, maybe they should not get the mortgage in the first place.