Home buyers and home owners should now feel safe. After all the government has seen to it that even those most removed from knowledge of the mortgage process can now be treated equally with those who took years to understand personal finance, build their credit, save for a down payment and expense reserves, and generally have lived a very conservative lifestyle. Thanks to two Democrats in high places now even the most liberal of home loan shoppers can throw caution to the wind and expect equal treatment under the threat of prosecution to the bank loan officer.
The Wall Street Reform and Consumer Protection Act includes language directed at evil loan officers who's only goal in life is to lie, cheat and steal to get the poor, innocent home owner or buyer to sign papers they don't understand to receive a loan they cannot repay. Without need to worry because, here in the United States at least, one can squander their life away and rest peacefully on the breast of the federal government whose human components will do almost anything to buy a vote.
Obviously the reader has by now detected a hint of sarcasm. In truth the new law, Public Law 111-203, will mostly protect home owners from ghosts of the past. Among other protections this offers is a requirement for loan officers to verify the applicant's actual ability to repay the loan. This ability to issue loans to home owners or buyer based solely on a statement of income is long gone. While the stated income loan should still exist in its originally use it, like the dinosaur, is lost to the past.
In the late 90s the demands of Congress made their way to the bank. The "under served" had been prevented equal access to mortgage loans by the big banks. "The wealthy are keeping down the little man in an un-welcomed control of American equity" was the cry from Chris Dodd, Barney Frank and President Clinton. The result was Fannie Mae meeting the demands of Congress and loosening lending guidelines so as to provide home loans for those who previously could not qualify due to lack of down payment, diminished credit worthiness and lower income.
Fannie Mae's guidelines were subsequently changed to allow loans to be purchased which had never before been allowed. For the next 10 years while conservative members of Congress tried to reinstate common sense into mortgage banking they were repeatedly defeated by the committees and influence of the two previously mentioned members of Congress resulting in a continuation of decreased lending guidelines which ultimately ended in massive defaults, a crippled economy and trillions of dollars in lost revenue. To make up for it the current Congress and Administration have thrown literally hundreds of billions of dollars into the fire.