The new rules will keep more people renting who shouldn’t be taking on mortgages they may not be able to afford. Lisa Prevost of the New York Times, however, reports both sides of another but closely related argument.
Required under the Dodd-Frank Act, the rule prohibits the “no-doc” loans common during the bubble.
In a statement issued shortly after the release of the rule, Debra Still, the chairwoman of the Mortgage Bankers Association, applauded its “safe harbor” provision. But she expressed concern that some of the restrictions might curb competition and further tighten access to credit.
On the contrary, said Barry Zigas, the director of housing policy for the Consumer Federation of America, the rule’s clarity and legal protections ought to be a stabilizing force on the market. “In the case of prime loans,” he said, “lenders have a pretty broad protection from liability, which should be an incentive to offer these kinds of basic loans. The industry has been blaming regulatory uncertainty for tight credit. The test for them now, to put it bluntly, is to put up or shut up.”