Easier mortgage conditions might just be underway. It should be easier to get a mortgage if lawmakers will pass the “Dodd-Frank Act Reform Law” which will lift lending restrictions on community banks. Currently, the US Congress is discussing if it would be possible to ease some of the mortgage laws as part of a larger effort to revamp.
Dodd-Frank Act of 2010
The Dodd-Frank Act of 2010 set restrictive measures to mortgage lending as a response to the financial crisis at the time. Since the current conditions are very far from those of 2010 and the real estate industry is in a very healthy state, reforms are being considered. If a version of the reform law in the Senate passes it would mean greater ease for homebuyers. Also, it would more than likely allow them to get approval for a mortgage from their local community bank or credit union.
According to experts, current mortgage laws are too restrictive due to the Qualified Mortgage rule. The rule is based on your ability to repay the mortgage. It requires primarily, that your debt does not exceed 43 percent of your income. Added than that are certain requirements which make it harder to provide your income especially if your business has inconsistent flow of income.
“Lenders, particularly retail banks, have just stopped taking on any risk at all,” Sharga says. “Getting those smaller lenders back into the game could have a material impact on the housing market.”
Easier Mortgage and the Proposed Dodd-Frank Reform Law
Once the new law passes in Congress it will empower community banks and credit unions. The current draft of the law allows them to offer mortgages outside the typical Qualified Mortgage rule. The condition to this is that they will not sell that particular mortgage and keep it in-house. Various lenders across the nation believe it would allow more community lenders to offer mortgages.
“Financial regulation should promote safety and soundness while enabling a vibrant and growing economy,” said Senate Banking Chairman Sen. Mike Crapo, R-Idaho, during a markup of the bill Dec. 5. “The bill we are marking up today is the product of a thorough, robust process, and honest, bipartisan negotiations.”