New Legislation on Mortgage Loans

Back in January of 2014, the Fed enacted new legislation to regulate mortgage loans. These “ability to repay” rules are putting stricter standards regarding their practice of determining a potential borrower’s ability to repay the money that they have been loaned. In this way, they hope to prevent a market crash similar to what we saw last decade.

The legislation has come under some criticism. Critics fear that the higher standards will lead to greater costs on the part of the lenders, which will translate to higher rates for the borrowers. However, many remain optimistic that the effects will be minimal and largely only affect borrowers with weaker finances. Such people, representing the kind of people who got over their heads in debt with mortgages that they could not afford, will now have to set more reasonable goals for themselves in the real estate market. If all goes well, this legislation could go a long way towards maintaining a healthy economy in the coming years.

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