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Senator Pushes for Simpler, Consistent Home Loan Rules

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Federal regulators are now significantly overhauling rules to which mortgage originators and brokers must comply when granting this type of loan to consumers so that they are more affordable, but one top lawmaker says there needs to be greater clarity and uniformity in the process.

Sen. Bob Corker, a Republican from Tennessee, recently wrote a letter to some of the banking industry’s biggest federal regulators urging them to adopt rules consistent with those being presented by the Consumer Financial Protection Bureau so that mortgage professionals know exactly what type of restrictions they face, according to a report from his office. Corker wants the consistency across all of the federal programs, since loans backed by the government-sponsored enterprises Fannie Mae and Freddie Mac, as well as the Federal housing Administration, are exempt from restrictions where qualified residential mortgages (QRMs) are concerned.

Essentially, that means that when it comes to determining whether borrowers meet federal standards for obtaining this type of massive financing, lenders are living under two different sets of rules, the report said. As such, and in an effort to scale back Fannie and Freddie’s participation in the mortgage industry, Corker urged the U.S. Departments of the Treasury and Housing and Urban Development, as well as the Federal Deposit Insurance Corp., Federal Reserve, Federal Housing Finance Agency, and Securities and Exchange Commission to adopt the same standards for those backed QRMs that the CFPB recently put into place for the same type of loan.

“Forcing lenders to comply with two separate sets of rules isn’t good policy, and in this case, it would set back the timetable on doing what we absolutely must do – begin to move away from a complete dependence on the government for mortgage credit in our country,” said Corker.

Further, Corker, who serves on the Senate’s Banking, Housing and Urban Affairs Committee, also noted that given two different sets of rules, many lenders might even stop originating mortgages except those intended to be backed by some sort of government entity, the report said. Currently, these agencies back as much as 90 percent of all mortgages issued nationwide.

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The CFPB’s rules were recently announced, and designed to help consumers avoid taking on mortgages they could not afford to pay back. That type of problem is what led directly to the housing crisis and recession experienced a few years ago.

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