The Consumer Financial Protection Bureau (CFPB) on Friday introduced mortgage rules promising new rights for borrowers and greater protection from harmful practices. The new category of mortgages – termed a “qualified mortgage” – comes free of risky features and is made based on a borrower’s ability to repay over the course of many years – not just initially when low interest rates keep payments affordable.
The rules were praised by civil rights groups who underscored how valuable qualified mortgages will be for minority communities.
“Greater numbers of Latinos will become first-time homeowners in the years to come, helping both the economic mobility of their families and the prosperity of our nation as a whole,” said Janet Murguía, president and CEO of National Council of La Raza, in a joint statement with Marc Morial, president and CEO of National Urban League and Lisa Hasegawa, executive director of National CAPACD. “We commend CFPB for adopting a broad definition of a qualified mortgage, which will foster an inclusive housing market for Hispanic families just starting out. The rule will require lenders to be sure that borrowers can afford their loans, a commonsense protection that will benefit the entire market.”
The new rules ban servicers in most cases from initiating a foreclosure until a borrower is delinquent for more than 120 days, giving borrowers time to explore loan modification options. These options will also be easier to obtain and issued by nearly every type of servicer.
“Since the mortgage meltdown, serious abuses by the servicing industry have led again and again to unnecessary foreclosures with a tremendous cost for families and communities. Servicers have repeatedly ignored rules, contracts and even legal settlements,” according to a press statement by Americans for Financial Reform. “The CFPB has already demonstrated a commitment to serious supervision and oversight, so we are hopeful that these new rules will finally be honored, and that homeowners will more often be able to keep making payments and stay in their homes. At the same time, we believe there remain holes in the servicing protections for borrowers, and so it will be crucial to follow how the new standards are working in practice, and fill in gaps where necessary.”