Last week, the newly established Consumer Financial Protection Board (CFPB) announced new, stricter regulations for Qualified Mortgages (QM). Banks that offer these qualified mortgages will be protected from lawsuits if they adhere to the federal governments rules.
"The federal government has no businesses involving itself in the private housing market,"stated Westmoreland. "One of the major causes behind the housing crisis was the federal government's involvement in our housing market back in the 1990s. They passed regulations that required lenders to relax standards and qualifications so that people who could not actually afford home loans got them. Now, ironically, they are demanding lenders stop the practices they forced on them to begin with."
Among some of these new rules, a borrower cannot have debt that amounts to more than 43 percent of income, which can make it more difficult for low-income people to qualify. In addition, in markets like Atlanta where prices are high, buyers could also have a harder time acquiring a loan. Many experts do not expect the new regulations to free up additional credit nor do they expect it to truly encourage lenders to offer more loans.
"Look, of course we want people to purchase homes they can afford and we need lenders to make sure that home buyers are capable of paying their mortgages," stated Westmoreland. "But the federal government should not be the one to establish blanket rules that govern hundreds of millions of Americans and thousands of lending institutions. Many of these loans need to be determined on a case-by-case basis. Often, someone who might not be great on paper would actually be a great borrower, and vice versa. It's this president's belief that he knows best, no matter what -- his Harvard degree outshines any lender's years and years of actual work experience. It's offensive and it only makes things worse."
The CFPB was established under Dodd-Frank and has been one of the most controversial elements of the law since its conception. It came under further scrutiny when President Obama gave a recess appointment to the director, even though Congress was not technically in recess. It has called into question the legality of the president's appointment and therefore the legality of any moves made by the CFPB.