In a move that may radically change the housing market, the federal Consumer Financial Protection Bureau on Thursday unveiled new rules designed to essentially ban the kinds of high-risk loans that contributed to the housing bubble and the devastating crash that followed. Lenders will be barred from offering deceptive teaser rates that can lure borrowers into loans they can't afford. Banks will also have to verify homebuyers' ability to keep up with their mortgage payments. The aim of the sweeping rules, says Edward Wyatt at The New York Times, is to prevent a recurrence of the "unbridled frenzy" in lending that occurred when banks could rush to issue mortgages and then resell them, making a bundle regardless of whether the loans were ever repaid. Plus, with clear rules in place, banks will be protected against complaints of abusive lending, creating, in theory, a win-win for lenders and borrowers.
The government is essentially doing nothing more than requiring a little common sense and caution from everybody, says Danielle Douglas at The Washington Post. Of course, there's a catch. The "ability-to-pay" rules, which take effect next January, will make it harder for some people to get help realizing the American dream of owning a home.
Well, borrowing might get harder for some, but it could get easier for others, says Brad Thomas at Seeking Alpha. High-risk borrowers might very well be out of luck. But the new rules could make it easier to get a mortgage for qualified buyers who can afford to make their payments, by reassuring banks that have become skittish about making loans.
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All the government is doing, says Ed Morrissey at Hot Air, is telling lenders they can go back to observing "rules they liked before the government forced them to stop using them." It was the government that stuck its nose into lenders' business in the 1990s with the Community Reinvestment Act and later with incentives for the subprime lending that inflated the housing bubble.
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