Editor: David Reiss
Brooklyn Law School

February 20, 2014

Reiss on Mortgage Availability

By David Reiss

The Consumer Eagle quoted me in Will Mortgages be Harder to Get in 2014? It reads in part,

David Reiss, Professor of Law at Brooklyn Law School, also sees some benefit in more conservative guidelines. “The QM rules and ability-to-repay rules legislate commonsense things like making sure people can repay loans that they take out, which was something that was given up not only in the last boom but in the boom that preceded it. So from the consumer perspective, you now know that when you get a mortgage you’re probably going to be able to pay it back,” Reiss says. “Some consumers and some people in the industry would say let people make their own decisions with minimal consumer protection regulation, but we had a phase of that and it ended poorly for all of us.”

Borrowers who are self-employed or have irregular income may have a harder time qualifying for a loan under the new rules. Reiss notes that those who are ineligible for a QM may still be able to get a non-qualified mortgage. “What we haven’t seen is what this non-QM market is going to look like in 2014 and beyond,” Reiss says. “It’s a new market.”

Members of the banking industry have expressed concerns about the changes. In recent testimony before the House Committee on Financial Services, William Emerson, CEO of Quicken Loans and vice chair of the Mortgage Bankers Association, said the rules “are likely to unduly tighten mortgage credit for a significant number of creditworthy families who seek to buy or refinance a home” and “may impair credit access for many of the very consumers they are designed to protect.”

Reiss notes that consumer protections are always a compromise. “Regulators want to be conservative to protect consumers, but they also don’t want to keep people who would pay back their loans from getting credit,” he says. “There’s always a dance.”

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