No more ‘Ninja Loans’ as Fed tightened rules

Federal regulators released final mortgage rules on Thursday aiming to clean up the marketplace by forcing lenders to consider a borrower’s ability to repay a loan, while also offering lenders protection from consumers’ legal actions if loans go bad.

The Consumer Financial Protection Bureau’s rules say that lenders must document borrower characteristics such as employment status, income and credit history, among other items.

“We believe this rule does exactly what it is supposed to do: It protects consumers and helps strengthen the housing market by rooting out reckless and unsustainable lending, while enabling safer lending,” said Richard Cordray, director of the CFPB, in prepared remarks.

Regulators want to prevent the kinds of risky loans that led to the financial crisis from reentering the U.S. mortgage market. Officials also hope that the establishment of clear rules will encourage lenders to loosen standards that officials say have grown overly restrictive.


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