Marketplace Rules Restricting Access to Credit


There are many qualified borrowers being rejected for home loans because the rules are not clear enough, says Department of Housing and Urban Development secretary Shaun Donovan.

The lack of clarity is leading lenders to tighten guidelines too much and closing off access to credit, especially to minorities.

So HUD is looking to simplify things and a prime example of that is the alignment between the qualified mortgage rule and the qualified residential mortgage rule, he tells the Mortgage Bankers Associations annual convention in Washington.

It is also putting the Federal Housing Administration program guide and mortgagee letters into one single-family policy handbook. The first section of that is being unveiled on Tuesday and HUD welcomes industry comments, Donovan said.

Immigration reform and health care reform as promoted by the Obama administration benefit the housing market, he adds.

Health care reform puts more money into Americans pockets by reducing medical costs. It also will relieve the burden of a catastrophic event affecting a familys finances so much that they are unable to make their mortgage payments and their home goes into foreclosure, he says.

Immigration reform is good for lenders wallets because the communities who would benefit the most are the same ones leading new household formations in this nation.

Government actions are keeping mortgage bankers from serving those markets, says David Stevens, MBA president and CEO and a former federal housing commissioner in the Obama administration.

Policymakers have not turned the page from the actions taken to right the markets in the wake of the housing crisis and they continue to clamp down on risk.

They are also pursuing enforcement actions which made sense two years ago but now impede the countrys economic health, he says.

Overall, the government has overcorrected and it has gone too far.

Home Mortgage Disclosure Act data show the denial rate for African-Americans on conventional, nonjumbo, purchase loans is over 50%. This means a lot of borrowers are being denied access to credit under the very tight post-crisis rules, Stevens says.

Creating a risk-free housing market will only benefit the people who need help the least. The end result from this zero risk environment will be zero lending to those who need it most, he says.

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