New Mortgage Rules

With all of the hastily arranged government plans to resolve the credit crisis and/or solve the mortgage/housing debacle, there were bound to be some solutions offered that makes you wonder how somebody could actually have the guts to put some of the proposals in writing.

I was reminded of that when I read the story “Fed proposes mortgage rules to protect borrowers.” If this matter wouldn’t be so serious, it would qualify as the joke of the week. Here are some snippets from the article:

Lenders will have to confirm that a borrower can afford a mortgage before making a loan under protections proposed by the Federal Reserve on Tuesday, following defaults and losses on U.S. subprime mortgages this year.

The proposals are intended to replace loose lending standards that have put many Americans at risk of losing their homes because they took out mortgages they could not afford and may not have fully understood.

The proposed regulations would require that lenders confirm a borrower can afford a home loan by verifying his income and assets with tax records, payroll receipts, and other documentation.

The new rules are aimed at ending the recent practice of so-called “stated income” loans in which borrowers state their income without any evidence.

Wow, these are truly far reaching new ideas. How dare they? I will actually need to verify my income and thereby demonstrate that I can afford the mortgage? It’s just not fair. Isn’t that what they did in the last century? I thought we made some progress here by simply being able to write down our income and get a loan with no questions asked. What’s the world coming to?

OK, so just in case I mess up, here’s something that should help:

The new rules will not assist today’s struggling homeowners but would give consumers the right to sue mortgage lenders who act unfairly and deceptively in preparing loans in future.

Ah, that sounds good and makes me feel better! I am sure that I can find something that is not right with my new loan, just in case I fall on hard times and can’t make the payments again; I then simply sue the bastards. I love it when the government comes up with unique ideas, don’t you?

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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