Tighter federal mortgage regulations go into effect today that place stricter caps on debt-to-income ratios, in the hopes that lenders stop originating mortgages to those who cannot repay them .
The new rules, put forth by the Consumer Financial Protection Bureau, were designed to rein in future bubbles, like the one that lead to the 2008 financial crisis.
“These simple principles will help us ensure that the mortgage market never melts down again the way it did just a few short years ago, making people’s lives miserable in the process,” CFPB director Richard Cordray said in a speech Tuesday before the National Association of Realtors, the New York Daily News reported.
Borrowers’ debt-to-income ratio must be less than 43 percent to qualify, and points and fees will be limited to 3 percent for a loan of more than $100,000, according to the News. Lenders are also required to warn borrowers when rates change in an adjustable-rate mortgage, and lenders must send a monthly statement. However, banks will be protected from future lawsuits from customers with qualified mortgages, the News said.
However the new rules could also make it more difficult for first-time home buyers to qualify, and lenders can still offer non-qualified loans, likely charging higher rates to borrowers with less credit, as the Real Deal reported. [NYDN] — Angela Hunt