Specifically, debt-to-income ratio cannot exceed 43%, points and costs cannot exceed 3% and banks must independently verify that a borrower “has the ability to repay” via eight different criteria.
While the all sounds logical and well intentioned, we can foresee some problems.
“Here’s the catch, about 20% of people who have mortgages right now, will not be able to get qualified mortgages. So what’s going to happen to those people is they’re going to have to go elsewhere for the new mortgage loans, or banks will have to price them more expensively because they don’t have these protections against lawsuits.”
What that means, is that “it’s starting to sound like we may be seeing what used to be sub-prime loans again,” as well as the reality that more people will be pushed into the rental market.
It is important to point out that all of this comes at a time when homeownership levels are already falling, from a peak of 69% to just 63% today. It’s a trend we fear could carry huge societal ramifications given the fact that 75% of American wealth has historically come from home ownership,
Mess with that safety net, and it’s easy to see why she says the ripple effects of unintended consequences could easily outweigh the benefits of a four year old law.
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