The newly-minted Consumer Financial Protection Bureau is circulating a series of new mortgage regulations that would ban some of the least savory tactics of the bubble era, the New York Times reports. Banks won't be able to offer deceptive teaser rates, or charge balloon payments, for example. They'll also have to document customers' ability to pay—no more no-document "liar loans"—and won't be able to make loans that would saddle them with debt exceeding 43% of their income.
Banks that follow these new rules will in turn be exempt from lawsuits, which the bureau hopes will encourage more lending. If nothing else, it has earned the industry's approval. "Now everybody knows if you stay inside these lines, you are safe," the CEO of the Mortgage Bankers Association said. He cautioned, however, that credit wouldn't necessarily loosen immediately when the rules kick in next year, because nearly all mortgages are being sold to Fannie Mae and Freddie Mac, whose underwriting standards haven't changed. (More Consumer Financial Protection Bureau stories.)
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