No. Seriously. Read on.
New mortgage rules issued last week by the administration will have the effect of forcing lenders to approve prime loans to borrowers who would normally only qualify for subprime loans carrying higher interest rates and fees to cover the added risk of default.
Banks are already under renewed pressure from federal prosecutors and regulators to make home loans to low-income borrowers with blemished credit as part of the administration’s stepped-up enforcement of anti-redlining laws.
Before the mortgage crisis, lenders were able to hedge losses by placing such homebuyers in higher-cost subprime mortgages — something the government at one point actually encouraged as part of a strategy to expand credit opportunities for lower-income minorities and close the racial “mortgage gap.”
But under the new mortgage rules, loans with subprime features do not fall under the official government definition of “qualified mortgages,” and therefore do not provide a “safe harbor” against lawsuits and other action.
As a result, analysts warn lenders may end up having to “subsidize” riskier borrowers at the expense of other customers.
This means that if you have a good credit rating and reliable income source you will have to pay a higher interest rate (and possibly higher closing costs) when buying a home. This arrangement favors the banks, the government and the sub-prime applicants, but punishes you for being a productive, credit-worthy and responsible member of society.
But wait, there’s more. When these loans inevitably go belly up, you will be on the hook for bailing them out… just like last time. You remember last time. It was four yeas ago.
That’s okay. When this new house of cards collapses, they will blame it on George Bush, Bain Capitol and Wall Street greed. Nobody will remember who really did it. Nobody.