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Monday, January 14, 2013


Assuring Consumers Have Access to Mortgages They Can Trust

Editor's note: This post was originally published on the official blog of the Consumer Financial Protection Bureau

Today, we’re issuing one of our most important rules to date, the Ability-to-Repay rule. It’s designed to assure the reliability of mortgages – making sure that lenders offer mortgages that consumers can actually afford to pay back. This is a simple, obvious principle that needs to be cemented in the housing market.

In the run-up to the financial crisis, we had a housing market that was reckless about lending money. Lenders thought they could make money on a loan even if the consumer could not pay back that loan, either by banking on rising housing prices or by off-loading the mortgage into the secondary market. This encouraged broad indifference to the ability of many consumers to repay loans, which dramatically increased mortgage delinquencies and rates of foreclosures.

Earlier this year, we heard from a California man named Henry, who was in the process of foreclosure. He was desperate. During the overheated years, a lender sold him a mortgage valued at more than half a million dollars. This was far more than he could afford on his annual salary of less than $50,000. He said he’d assumed that the lender knew what it was doing when he qualified for such a large loan. He’s now worried not only about losing his home, but about losing his family’s entire future.

Henry is not alone. Unaffordable loans helped cause the worst financial crisis since the Great Depression. People across the country were sold unsustainable mortgages. Some may have entered with their eyes open, seeking to ride the wave of rising housing prices, but many were led astray. For many borrowers, it appears that lenders ignored the numbers to get the loan approved. This kind of reckless lending was an endemic problem.
To put it simply: lenders should not set up consumers to fail.

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act created broad-based changes to how creditors make loans including new ability-to-repay standards, which we are charged with implementing. Among the features of our new Ability-to-Repay rule:
  • Potential borrowers have to supply financial information, and lenders must verify it;
  • To qualify for a particular loan, a consumer has to have sufficient assets or income to pay back the loan; and
  • Lenders will have to determine the consumer’s ability to repay both the principal and the interest over the long term − not just during an introductory period when the rate may be lower.
In addition to the Ability-to-Repay rule, today we are also issuing a proposal for potential adjustments. There are two key parts to the proposal:
  • First, a proposed exemption for designated non-profit creditors and homeownership stabilization programs, as well as certain Fannie Mae, Freddie Mac, and Federal agency refinancing programs. These programs generally appear to be already subject to their own specialized underwriting criteria, and they are designed to help consumers refinance into a more affordable home loan.
  • Second, a proposed a new category for certain loans made and held in portfolio by small creditors, such as small community banks and credit unions, called “Qualified Mortgages.”
Qualified Mortgages are a category of loans where borrowers would be the most protected. They, among other things, cannot have certain risky features like negative-amortization, where the amount owed actually increases for some period because the borrower does not even pay the interest and the unpaid interest gets added to the amount borrowed.

In the wake of the financial crisis, credit is achingly tight. Interest rates are low, but it is hard to qualify for a home mortgage. As the American mortgage market ebbs and flows, we have the duty to protect responsible lending in the housing market for borrowers, lenders, and everyone else who is engaged in the economic life of our country. We have been working hard, and we will continue to work hard, to do just that.

Consumers should be able to trust the American dream of homeownership without worrying about losing the roofs over their heads and the shirts off their backs. The Ability-to-Repay rule will help ensure that lenders and consumers share the same basic financial

incentives – that both of them win when borrowers can afford their loans. With this confidence, consumers can be active participants in the market and choose which of a wide variety of products they believe is best for them.

How Many People Have Been Killed by Guns Since Newtown?

Slate partners with @GunDeaths for an interactive, crowdsourced tally of the toll firearms have taken since Dec. 14.

 

 By and
Posted Monday, Jan. 14, 2013, at 8:30 AM ET
The answer to the simple question in that headline is surprisingly hard to come by. So Slate and the Twitter feed @GunDeaths are collecting data for our crowdsourced interactive. This data is necessarily incomplete. But the more people who are paying attention, the better the data will be. You can help us draw a more complete picture of gun violence in America. If you know about a gun death in your community that isn’t represented here, please tweet @GunDeaths with a citation. (If you’re not on Twitter, you can email slatedata@gmail.com.) And if you’d like to use this data yourself for your own projects, it’s open. You can download it here.

Deaths by City Click a circle to filter deaths by location.

I could not embed the graph or map. And I believe this is important enough that both be kept together.  

Kois said when you look at the chart you realize there is a Newtown, Conn. happening each day. "It's not in the same place with the same shooter, but it's happening every day." (Image courtesy Slate.com) slate_gundeathschart.jpg

 Deaths since Newtown:  =836
Newtown
Methodology  
Each victim under 13 years of age is designated "child"; from 13 to 17: "teen"; 18 and older: "adult."
The same icons used to represent male victims is also used to represent victims of unknown gender.
The same icons used to represent female victims is also used to represent victims of unknown age group.
The data are not comprehensive and are not suitable for statistical analysis.