Today the Consumer Financial Protection Bureau issued a new "ability to pay" rule aimed at protecting you from such risky home loans by requiring lenders to ensure you have the ability to repay your mortgage.
A key element of the housing crisis and meltdown was lenders making high-risk, and sometimes deceptively packaged, home loans without any real regard for whether borrowers would be able to repay them.
The new rule will take effect a year from now.
"In the run-up to the financial crisis, we had a housing market that was reckless about lending money," said CFPB Director Richard Cordray. "Lenders thought they could make money on a loan even if the consumer could not pay back that loan."
Among the features of the ability-to-repay rule:
- Potential borrowers have to supply financial information, and lenders must verify it;
- To qualify for a particular loan, a consumer has to have sufficient assets or income to pay back the loan; and
- Lenders will have to determine the consumer's ability to repay both the principal and the interest over the long term not just during an introductory period when the rate may be lower.
Consumers Union, the advocacy and policy arm of Consumer Reports believes the new CFPB rule will help home owners avoid bad loans, but also believes that the CFPB should keep up pressure to ensure all mortgages are fair.
"While it's good that the CFPB is going after some of the worst abuses in the mortgage market, we urge them to keep the pressure on to ensure all mortgages offered to consumers are fair and appropriate," says Pamela Banks, senior policy counsel for Consumers Union.
For information on how to get a low-rate home mortgage read our report "How to overcome 7 barriers to qualifying for the best loans."
Source:
Assuring consumers have access to mortgages they can trust [CFPB]
No application for a home loan is guaranteed to succeed, not even when the applicant has an excellent credit rating. But it can seem strange that even those who have very poor credit ratings are as likely to achieve approval as anyone else. This is down to the strength of their application.
ReplyDeleteCredit ratings are not a significant part of Hawaii mortgage loans assessment process, and for that reason they are never enough to kill off the chances of an approval. The result is that securing home loans with bad credit is possible when a large enough down payment is made, or the credit rating has been improved, as well as the basic criteria have been met.