Could New Mortgage Rules Ultimately Hurt Homeownership?

On January 10, new mortgage rules proposed by the Consumer Financial Protection Bureau (CFPB) went into effect.

These new rules – the “qualified mortgage” and “ability-to-repay” rules – ostensibly were designed to eliminate the possibility of unaffordable mortgages like the ones that ultimately caused the housing market crash in 2007.

Some, though, say that the new mortgage rules will actually hurt the ability of many Americans to purchase a home.

Take Rep. Spencer Bachus, for example. Rep. Bachus, in a speech delivered in a subcommittee hearing on Capitol Hill, said that new mortgage rules are overreaching and going to negatively affect the ability of many to buy a home.

This isn’t the first time people have expressed concern. Banking experts in the Birmingham area said they feared the impact of the rules on homeowners looking to take out loans, citing a statistic that 20% of all mortgages in 2013 wouldn’t have qualified under the new rules.

The new rules are attempting to create a uniform regulation for what qualifies for a loan. Lenders, for starters, will be legally liable for the loans they issue – meaning they will have to ensure that borrowers are able to repay their loans.

There are also other regulations to create what the CFB terms “qualified mortgages”. These mortgages will be tougher to obtain for some prospective homebuyers.

Impact on the Rental Market

As things stand now, we project that these new mortgage rules will ultimately have at least some negative impact on homebuying – and will, conversely, have a positive impact for the rental market.

As professional Alabama rental managers, we expect that the homebuyers who will not qualify now for home loans that they may have been able to obtain previously will have no choice but to rent. While we don’t anticipate that those who own homes now will become renters at some point as a result of this law, it is possible that the rental market will benefit from keeping those who otherwise would have moved on to homeownership.

There is a chance that Congress could reform the new mortgage rules at some point in the future, but for now, they are here to stay.