Possible Mortgage Restrictions Coming Up?

There is a federal proposal in the works that would not only require a 20% down-payment for a home purchase in order to qualify for the best mortgage rates, but also that would further restrict debt loads as part of the same qualification process. The impact of this is so great because it includes student loans as well as credit cards and car loans. It is estimated that a third of borrowers over the last year would not have qualified if these standards were in place already.  

Critics of the proposed regulation include those who otherwise have no debt, but whose mortgage alone would constitute a higher percentage of income. The reasons behind these kinds of regulations include the securities created from mortgage loan debt. Mortgages that meet the requirements will be exempt from exclusion from mortgage-backed securities derivatives. Critics also claim that such regulations will hinder those who are able to buy homes with cash, who have larger down-payments, but carry other debt and those who might otherwise have circumstances that would support favorable borrowing.

Proponents site an inability to predict changes in earnings, medical or health issues and things like a couple deciding to have a child and forego a certain portion of their income so that one spouse might stay at home to care for the child. Since discretionary income expenditures are not easily predictable, as well, there will be less risk to banks if loans are more heavily scrutinized. Overall, the thought is that the buyers and banks will be better off with greater oversight in the long term.

Disclaimer: This blog is for informational purposes only and does not establish a client-attorney relationship. Consult with an attorney before taking action on any information found herein as individual circumstances may affect the applicability of information provided. Call The Law Office of Michael Riley at 508-405-0831 with any questions.