(KPLR) – New mortgage regulations went into effect Friday. The new rules are designed to keep buyers from getting into loans they can’t afford and were created by the Consumer Financial Protection Bureau after the 2008 housing crisis.
Rick Bagy is president of First National Bank. He talked with Elliot Weiler about what the new rules could mean to you.
This new class of loans, called Qualified Mortgages (QM), prohibit interest-only and negatively amortizing loans and limits the amount of points – fees or prepaid interest on a mortgage – to 3% of a loan’s value.
Lenders will also be required to verify that borrowers have the ability to repay their loan.
The ability-to-repay rule says lenders must assess and document a potential home buyer`s income and assets, employment status, credit score and other outstanding debt levels before issuing a loan.