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New Rules Stop Banks From Giving Bad Loans

From the Associated Press:

New federal rules aim to curb risky mortgages

By DANIEL WAGNER | January 9, 2013

WASHINGTON (AP) — Federal regulators for the first time are laying out rules aimed at ensuring that mortgage borrowers can afford to repay the loans they take out.

"For the first time"? We have gotten reports on how the mortgage regulations have been fixed about once a week for the last four years. But you probably can’t be too careful when it comes to making sure that these greedy bankers stop tricking people into taking on mortgages they can’t afford.

The rules being unveiled Thursday by the Consumer Financial Protection Bureau impose a range of obligations and restrictions on lenders, including bans on the risky "interest-only" and "no documentation" loans that helped inflate the housing bubble.

Lenders will be required to verify and inspect borrowers’ financial records. They generally will be prohibited from saddling borrowers with loan payments totaling 43 percent of the person’s annual income.

What a travesty of justice this is, even by today’s standards of justice. It wasn’t the banks who pushed for these ‘risky mortgages.’ They were required to make loans to people with terrible credit and no discernible income.

Where are the federal restrictions on the Community Reinvestment Act?

CFPB Director Richard Cordray, in remarks prepared for an event Thursday, called the rules "the true essence of ‘responsible lending.’"

The rules, which take effect next year, aim to "make sure that people who work hard to buy their own home can be assured of not only greater consumer protections but also reasonable access to credit," he said.

Cordray noted that in years leading up to the 2008 financial crisis, consumers could easily obtain mortgages that they could not afford to repay. In contrast, in subsequent years banks tightened lending so much that few could qualify for a home loan…

And if they couldn’t get such loans, the banks would have been hauled into court. Just like once upon a time Barack Obama helped to sue Citibank for ‘red lining,’ in one of his very rare cases as a practicing lawyer.

The bureau also proposed amendments that would exempt from the rules some loans made by community banks, credit unions and nonprofit lenders that work with low- and moderate-income consumers.

Naturally, ACORN and Obama’s other ‘homies’ aren’t going to have to follow any such rules.

This article was posted by Steve Gilbert on Thursday, January 10th, 2013. Comments are currently closed.

One Response to “New Rules Stop Banks From Giving Bad Loans”

  1. USSFreedom

    In the mid to late 60’s banks were shunned for “conventional” home loans by most black RE brokers as they guided their buyers to the more lenient FHA-VA loans, i.e. Low and/or 0 down payment, closing costs and points paid by the seller plus income verifications accepted from the borrower’s relatives, paying just enough for babysitting etc. to get them over the accepted qualifying income level mark. The crash in the RE market in the early 70’s only a pop compared to the last explosion, as government backed loans were acquired without ANY verifications needed for approval. Civil Rights was to include home ownership even to the un or under employed back then. Areas saturated with these loans turned into urban blight within 6 years. How much did Fannie & Freddie drop last time around?
    Banks were a bit tougher than government backed loans until the doors were blocked by those involved in community organizing. Anyone come to mind?


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