Will new mortgage rules mean fewer lenders?
Banking industry representatives say smaller lenders may not be able to handle new rules designed to make mortgages safer for consumers, which could hurt potential homebuyers. Are they right?
This post comes from Brandon Ballenger at partner site Money Talks News.
In the past few years, big banks have been backing out of the mortgages business somewhat as regulation have tightened, The Wall Street Journal says. Smaller lenders, including regional banks and companies that focus specifically on mortgages, have been picking up the slack.
"As of the third quarter, smaller mortgage players held a 60% market share of the U.S. origination market, up from 39% in 2009, according to industry publication Inside Mortgage Finance," the WSJ says. But that trend could soon reverse because of new rules coming Jan. 10.
We recently explained how the new rules are going to make it harder to get a mortgage.
Those rules are meant to prevent foreclosures, but they could push some smaller lenders out of the market, the Mortgage Bankers Association and others in the industry told CNNMoney. Those companies that don't verify that consumers can actually afford their mortgages will be hit with harsh penalties, and the costs of avoiding the penalties may be too high for some.
Banks won't be able to lend to anyone whose total monthly debt payments amount to more than 43% of their income. They'll also have to carefully check borrowers' pay and bank records, tax returns, and a lot of other paperwork. For lenders, that means updating policies, retraining staff, and possibly hiring additional experts to oversee the process, CNNMoney says. Some may just decide to give up instead.
On the other hand, this could just be lenders grumbling about their enforced responsibility. Ellen Schloemer, a spokeswoman for the Center for Responsible Lending, suggested as much to CNNMoney. She pointed to an analysis from CoreLogic that suggests lenders can handle the new rules.
That report concludes (.pdf file), "We have a robust capital market system today, and it's reasonable to think that a savvy entrepreneur or established organization will figure out a way to deliver qualified and non-qualified mortgages in a way that meets all the regulatory requirements, incorporates sound lending and consumer protections, and makes a profit."
More on Money Talks News:
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] The stock market finished a down week on a cautious note with small caps leading the retreat. The Russell 2000 lost 0.5%, widening its weekly decline to 2.6%, while the S&P 500 shed 0.3%. The benchmark index ended the week lower by 2.7%.
This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'