New Rules Could Affect Boston Mortgages

Boston mortgages, and your ability to qualify for one, will be affected by new servicing rules designed to provide homeowners with more information about their mortgages and their options, should those loans become New rules affecting Boston mortgagesunaffordable.

The new rules affecting Boston mortgages will force banks to verify a borrower’s ability to repay loans to ward off the kind of loose lending that helped push the U.S. economy into recession. The new rules would also protect borrowers from irresponsible mortgage lending by providing some legal shields for lenders who issue safer, lower-priced loan products.

The U.S. economy is still feeling the after-effects of the bubble, which sparked a global credit crisis after it burst in 2006. As the housing market imploded, banks sharply tightened the screws on lending, affecting not only Boston mortgages, but mortgages nationwide.

Because lenders are likely to want the heightened legal protection that comes with offering certain “plain vanilla” loans, the rules could go a long way in determining who gets a loan and who can access low-cost borrowing rates.

New Definitions For Boston Mortgages

The consumer protection bureau said it would define “qualified Boston mortgages” as those that have no risky loan features – such as interest-only payments or balloon payments – and with fees that add up to no more than 3 percent of the loan amount.

In addition, these loans must go to borrowers whose debt does not exceed 43 percent of their income.

The new rules establish an additional category of Boston loans that would be temporarily treated as qualified. These Boston mortgages could exceed the 43 percent debt-to-income ratio as long as they met the underwriting standards required by Fannie Mae, Freddie Mac or other U.S. government housing agencies.

The provision would phase out in seven years, or sooner if housing agencies issue their own qualified mortgage rules or if the government ends its support of Fannie Mae and Freddie Mac, the two housing finance giants it rescued in 2008.

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Regulators also proposed creating a qualified mortgage category that would apply to community banks and credit unions.

Banks will have until January 2014 to comply with the new rules.

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