Special Report: New Mortgage Rules Take Effect

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 Although many economists claim the recession is over, millions of Americans are still reeling from its financial effects. In particular, communities of color continue to be disproportionately affected by billion-dollar losses in family wealth. New mortgage rules, effective as of January 10, offer a strong foundation to begin rebuilding what has been lost. These new rules will provide protections for consumers whether they are struggling with troubled mortgages, looking to buy a home or seeking access to credit.

Summarizing the reasons for the new rules, Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB) recently said, “Consumers want – and need – someone to stand on their side and provide safeguards against bad mortgage deals that ruin their credit, cost them their homes, and saddle them with additional problems. . . .No debt traps. No surprises. No runarounds. These are bedrock concepts backed by our new common-sense rules that take effect on January 10.”

A central part of the new rules is a new designation of a Qualified Mortgage (QM) which sets standards that apply to all lenders and covers about 95 percent of loans currently in the marketplace. QM loans are restricted from having the kind of risky features that caused the financial crisis. QM loans must be fully amortization, meaning that loan balances cannot increase as payments are made. 

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