The Consumer Financial Protection Bureau is now requiring lenders to ensure that homebuyers can actually pay their mortgage before lending them the money.
The new “Ability-to-Repay” rule issued Thursday protects consumers from irresponsible mortgage lending practices such as “no doc” and “interest only” features that the bureau said helped force many borrowers into delinquency and foreclosure after the 2008 housing collapse.
“When consumers sit down at the closing table, they shouldn’t be set up to fail with mortgages they can’t afford,” CFPB Director Richard Cordray said in the bureau’s announcement.
“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,” Cordray said.