At long last, the Consumer Financial Protection Bureau has unveiled sensible new home mortgage rules aimed at protecting consumers, banks, and investors while avoiding another financial meltdown.
The rules require banks to determine whether a borrower can actually pay back a loan. That may seem like a no-brainer, but it is quite an accomplishment, considering that in the years leading up to the 2008 recession, billions of dollars in mortgages were given to people who had no hope of paying off their loans. As a result, more than four million mortgages went into foreclosure.
Under the new rules, which go into effect in 2014, the lender has to take into account a borrower's income, job, and overall debt, including credit-card debt, student loans, car loans, and other obligations. If debt exceeds 43 percent of a consumer's income, the consumer won't qualify for a mortgage.