The Consumer Financial Protection Bureau has enacted new guidelines to protect borrowers from poor mortgages. The guidelines would also lend legal protection for mortgage lenders who provide less risky and lower-priced loans. From NBC News,
The new rules are intended to combat lending abuses that contributed to the U.S. housing bubble, when shoddy mortgage standards led American households to take on billions of dollars in debt they could not afford.
The U.S. economy is still feeling the after-effects of the bubble, which sparked a global credit crisis after it burst in 2006. As the housing market imploded, banks sharply tightened the screws on lending.
Regulators said the new rules would head off future crises by preventing irresponsible lending, without forcing banks to restrict credit further. Lenders will have to verify a potential borrower’s income, the amount of debt they have and their job status before issuing a mortgage.
The Dodd-Frank bill will be an interesting one to follow as the housing market begins its second year of recovery.
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