A complex new set of rules designed to limit risky loans is in place as of this week for mortgage bankers. The regulations were developed in response to the 2008 financial crisis.
That 2010 Dodd-Frank financial reform law was, among other things, supposed to make it harder for banks to issue mortgages fast and loose.
“For awhile it was easy, like going to the grocery store—you know, you went into the loan officer and you got a loan,” said John Zimmerman with the Miami Valley Fair Housing Center. He says limiting the accessibility of mortgages and making the process more transparent—both aims of the new rules—can protect people from getting into loans they can’t afford. He also says Ohio acted early to prevent a lot of the practices associated with predatory lending: a state law passed in 2007 dictated some of the same regulations now being rolled out federally.
Bankers and lenders, on the other hand, haven’t expressed as much confidence in the regulations. Don Weindorff, the mortgage director at FirstDay Financial in Dayton, thinks the new rules could mean a lot of undue paperwork for perfectly qualified homebuyers.
“Making us just jump through all kinds of hoops,” he said, adding that in general, he thinks it’s too soon to tell what the effect of the regulations will be.
In a speech last week, Richard Cordray, the head of the Consumer Financial Protection Bureau (CFPB, an agency created by the Dodd-Frank law) said ten percent of homeowners still owe more on their mortgages than their homes are worth. He called those people “victims of a broken system.”
The CFPB website has detailed explanations of all the new rules.
