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Consumer watchdog stakes out middle ground in mortgage rules


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276631-consumer-watchdog-stakes-out-middle-ground-in-mortgage-lending-rulesThe Hill:

New housing rules unveiled by the administration's new consumer watchdog agency Thursday would insert the government into the housing market in a manner unseen for decades.

The set of regulations unveiled by the 18-month-old Consumer Finance Protection Bureau will impose sweeping new restrictions on lenders and borrowers, potentially making it more difficult for would-be homeowners – especially in pricier markets like New York, California and Washington, D.C.

But with the country still smarting from a subprime mortgage debacle that pushed the economy into recession, consumer groups, lawmakers and the housing industry mostly accepted the changes as workable.

“It was the most important thing the government could do to actually let the market function,” said Kathleen Day, spokeswoman for the Center for Responsible Lending. “There’s a cop on the beat looking out in real time for consumers.”

The rules, required by the Dodd-Frank financial regulation bill, force banks to verify borrowers’ finances and prohibit so-called “no-doc” loans that became commonplace during the late 1990s and early 2000s. Also banned is the practice of using deceptive teaser interest rates that allowed lenders to mask the true costs and qualify borrowers who would not otherwise be eligible.

Sentiment among financial institutions ran generally positive about the CFPB's role in drawing up the rule after weighing input from a broad range of financial institutions. Much of the credit was bestowed on CFPB director Richard Cordray, whose recess appointment by President Obama last year drew fire from Republicans.Scissors-32x32.png

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