CFPB Issues New Rules to Help Reduce Risky Mortgages

CFPB Issues New Rules to Help Reduce Risky Mortgages

Today, the Consumer Financial Protection Bureau announced new mortgage rules that aim to reduce risky lending and make it harder for some consumers to qualify. The rules also look to ensure that borrowers can repay their mortgage loan.

Gone are the deceptive teaser rates or loans that required no documentation for borrowers. Lenders are prohibited from making loans if the borrower will have total debt that exceeds 43 percent of income.

The rules also restrict interest-only loans, balloon payments or negative-amortization loans. Banks can make these loans, but they won't be protected from potential borrower lawsuits. Mortgage originators will be restricted from charging high upfront points and fees.

The CFPB hopes these rules motivate banks to lend again. The rules also provide legal protection to lenders that follow the rules.

The rules take effect in January 2014.

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John Oldshue is the creator of He worked for over 15 years in television and won an Emmy award for his reporting. He covers credit card rate issues for