A federal regulator recently announced that it would like to hear from the public, including both borrowers and mortgage lenders, on the success of a newly instated ability-to-repay rule.
The Consumer Financial Protection Bureau implemented the rule requiring mortgage lenders to thoroughly assess a prospective borrower's financial standing before extending them a line of credit to purchase property.
"Through our ability-to-repay rule, we want to ensure that consumers are not set up to fail with mortgages they cannot afford and we want to protect access to affordable credit," said CFPB director Richard Cordray. "We are committed to gathering solid data to inform this important rule."
At the housing market's peak, mortgage records show that numerous borrowers were granted home loans they could not afford. However, this practice was so widespread that it resulted in a wave of property repossessions that wreaked havoc on the housing market.
As a result, the lawmakers passed the Dodd-Frank Act, which created the CFPB to ensure nothing like this ever happens again, by implementing lending regulation that requires lenders to make reasonable and good-faith estimates on a potential borrower's ability to repay a home loan.