Did you know that as of the new year, the Consumer Financial Protection Bureau has new qualified mortgage rules in effect to help borrowers understand the true costs of the mortgage they apply for?
According to the CFPB, its plan is expected to limit the number of foreclosures in the years ahead and eliminate many of the conditions that helped create one of the biggest real estate bubbles in U.S. history.
“The ability-to-repay rule is intended to prevent consumers from getting trapped in mortgages that they cannot afford, and to prevent lenders from making loans that consumers do not have the ability to repay,” reads a statement on the CFPB website. “Certain types of mortgages are more likely to become a debt trap for the borrower, so the new rule lays out basic guidelines that lenders can follow. They give lenders greater certainty that they are meeting the ability-to-repay requirement.”
Along with providing guidelines for getting a mortgage, it also spells out what happens when someone falls behind on their mortgage:
If one was to fall behind on their mortgage, the new rules provide some leverage as servicers will need to wait approximately four months before starting a foreclosure proceeding so there’s ample time to request a loan modification. If a homeowner applies for help, the servicer can’t simultaneously move forward with a foreclosure proceeding, and the homeowner will have the right to assistance from the mortgage servicer to help them with their options.
It is extremely important to understand the new rule and basic guidelines before beginning the process of home buying.