At the beginning of 2009, the U.S. economy was in the grip of one of the worst financial crises in our history. Home lending practices, which played a big part in that crisis, naturally assumed a prominent place on the agenda of financial reform. And now, five years later, groundbreaking new mortgage-lending rules have gone into effect, thanks to the diligent work of the Consumer Financial Protection Bureau.
To understand the new rules, it is useful to recall what they were designed to prevent – the kind of abusive LOANS and loan-marketing tactics that dominated the market in the pre-crisis years, leaving a trail of devastation from which homeowners, communities and the country are still struggling to recover.
Under one of the new regulations, a mortgage lender must verify a borrower’s ability to repay. That might seem to be an unnecessary rule; why would lenders need to be told to worry about getting repaid? And yet, in the run-up to the crisis, MORTGAGE LENDERS made millions of loans that borrowers could not possibly afford to repay – except, in some cases, by riding an endless wave of increases in housing prices, further inflating a bubble that was bound to burst. More here