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Paul Hickman, president and CEO of the Arizona Bankers Association, says he believes nearly every segment of the mortgage industry will incur some kind of added cost to comply with new rules, and borrowers likely will feel the brunt of it.
This month, a federal consumer protection agency has been releasing a slew of regulations set to take effect in January 2014 to protect struggling homeowners, heighten lenders’ transparency and put a stop to unaffordable loans that set up consumers for failure.
But one concern is being raised among critics and supporters alike: Might these regulations hurt the very consumers they are being set forth to protect?
“Compliance costs associated with these new regulations would unduly hamper the market because they’ll get passed on to the consumer,” Hickman said.
The changes also may throw a wet blanket over consumers’ already narrow ability to borrow and lenders’ ability to loan, said attorney J. Robert Eckley, founder and president of Phoenix-based Eckley & Associates PC, who specializes in real estate financing and banking.
“(Lenders) are all feeling it — they’re all saying they’re frustrated as heck,” Eckley said. “If the country is going to go back to a traditional mode … a chicken in every pot, a Hummer in every garage, then we’re going to have to liberalize debt and have to get income coming back into the system again. I don’t know if it’s in that mode right now.”
The new rules are meant to tighten up the underwriting practices that helped ignite the Great Recession, in which lenders relied on rising home values or offloading mortgages onto the secondary market to make money on loans they knew borrowers couldn’t afford. Lenders also became notorious for not verifying borrowers’ income or debts, and for issuing mortgages at low “teaser” interest rates that would soar to unaffordable levels within a few years.
