The government’s new consumer watchdog agency will issue mortgage-lending rules Thursday, requiring banks to verify a lender’s ability to repay their loans, the Wall Street Journal reports. CFPB Director Richard Cordray said that had the rules been in place over the past decade, the housing crises would have been avoided.
The rules, which go into effect next January, were designed to enhance consumer safety without tightening credit standards beyond current levels, officials said Wednesday.
The 2010 Dodd-Frank financial-regulation overhaul changed lending rules to make banks legally responsible for determining that a borrower is able to repay a mortgage. The CFPB’s rules are intended to implement that change. The upshot is that banks are likely to narrow their loan offerings and rely more on the 30-year, fixed-rate mortgage, a product unique to the U.S. and one that has required a government guarantee.
