Obtaining a mortgage, not what it used to be

The federal government has created new rules to avoid another mortgage meltdown that are set to go into effect October 1st. The new requirements aim to prevent buyers from obtaining mortgages they cannot afford, while holding lenders accountable for mortgages that go bad. Many critics of the proposed rules say the requirements will increase mortgage costs for borrowers and prevent many first-time buyers from entering the market.

The proposed rules for acquiring a mortgage include requiring future homebuyers to put a 20 percent downpayment to get a home loan, qualifying only borrowers with minimal debt and a high credit score for mortgages and rejecting all borrowers with a 60-day delinquency in his or her credit history from qualifying.

In an interview with Cincinnati.com, Mark Quarry, director of government affairs at the Cincinnati Area Board of Realtors, said the rules only hurt an already ailing housing market.

"People are going to be priced right out of the market under these requirements," Quarry told the news source. "The impact on the housing market and economy at large would be enormously devastating."

The website reported that the goalsof the new rules is to avoid practices that lead to risky loans. While borrowers would face strict requirements to obtain a loan, lenders would have to set aside 5 percent of the loans given to borrowers not meeting the requirements in cash reserves, cutting into their profits. This could result in higher mortgage rates and costs for loans to borrowers below the established standards.

In anticipation of the loan requirement changes, borrowers and consumers in the Washington, D.C., area are taking advantage of the lower rates now.

In an interview with the Washington Post, Bill White, vice president of real estate lending at NASA Federal Credit Union, said the institution has experienced a 50 percent increase in mortgage applications for the month of August. White said 70 percent of mortgage applications received by the credit union in the first three weeks of the month were for refinancing mortgages, despite most borrowers maintaining stable jobs.

"If you can go from a 5 percent interest rate to a 4 percent rate, you're giving yourself more breathing room for the future," White told the newspaper. 

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