Mortgage market expected to change based on new rules
01/03/2011
By Credit.com Staff
A portion of the Dodd-Frank Act, which was designed to protect consumers from predatory lending tactics, includes a provision that would set restrictions on the way lenders package and sell their home loans to third parties, according to a report from the Los Angeles Times. In particular, lenders would be required to retain more risk when doing so.
This may lead to fewer consumers being able to qualify for a home loan, the report said. Lenders would likely answer these restrictions by only lending to those with high credit scores, in an effort to ensure that these loans don't default. However, depending on what types of loan are exempted, this also may not become an issue at all.
The packaging and reselling of bad home loans that lenders knew would fail was one of the primary reasons for the financial meltdown a few years ago, as banks gave many subprime borrowers access to mortgages.
