Treasury Department To Challenge New Mortgage Rules
Although big banks that own mortgages in the US have been suffering, new home buyers have been able to reap all of the benefits. Housing pricing are the lowest that they have been in decades, and the 30 fixed interest rate is below 5%. However, banks want to enact a set of rules that would cause interest rates to soar. Reportedly, the US Treasury Department is taking action. Instead of letting the new Dodd-Frank financial law to go into effect, members of the Treasury Department have asked the public for feedback as well as suggestions.
Several groups that represent minorities and the poor believe that the new mortgage rules will have a negative impact on the people that they represent. In fact, it will become nearly impossible for first time home buyers to make a purchase unless they have a minimum of 20% of the total purchase price. Normally, mortgage companies look for no more than 10 to 15% down payments. Since the financial collapse of the housing market, lenders are looking for more secure investments.
Since only a small percentage of all buyers would be able to come up with 20% down, this means that mortgage companies would charge ‘high risk’ customers higher interest rates. This could very well mark the beginning of the prime-sub prime mortgage market. Consumers with less money and poor credit expect to pay more, but the real question that both the Obama administration, the bank industry and the Treasury Department are asking is how much do they really need to pay?