The new mortgage rules issued by the Consumer Financial Protection Bureau (CFPB) are in effect as of January 10th, 2014. Banks can no longer engage in irresponsible lending practices leaving borrowers unable to repay their mortgages. Lenders can only provide “Qualified Mortgages” that comply with the “Ability-to-Repay” rule. 

CFPB Director Richard Cordray says “when consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford. Our Ability-to-Repay rule protects borrowers from the kinds of risky lending practices that resulted in so many families losing their homes. This common-sense rule ensures responsible borrowers get responsible loans.”

Here are 8 features of the 2014 mortgage rules you need to know: 

1. No-doc or low-doc loans are prohibited: Lenders must supply and verify complete consumer financial information. 
2. Limited points and fees: No more than 3% for a loan of more than $100,000.
3. No risky loan features: Terms cannot exceed 30 years, no interest-only payments, no negative-amortization payments where principal increases.
4. Tightened Debt-to Income Ratio: Borrowers cannot exceed 43% Debt-to-Income Ratio (DTI)  
5. No “teaser” rates: Lenders must verify a borrower’s ability to repay BOTH principal and interest over the long-term, NOT only during an introductory or “teaser” period with lower interest rates. 
6. Contact with missed payments: Mortgage lenders must attempt contact with homeowners within 36 days of a missed payment. They must also provide available payment options no later than 45 days after the due date.
7. Clear monthly billing statements: Lenders must send clear statements indicating  what portion of your payment went to escrow and principal, balance owed, and any service or transactional fees. 
8. Early warning for ARM: Lenders must notify borrowers of increased rates 210-240 days before the next payment and follow up with an additional notice 60-120 days before the new payment is due.

Gail Hillebrand, associate director at the CFPB, says "every lender has to do some commonsense things to make sure the borrower can pay the loan back.”

“No surprises and no runaround.”

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For more information on the new mortgage rules click on any of the links below:

NY Daily News

Credit Solution Program

CFPB