New mortgage affordability rules offer hope

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"What is your assessment of the new set of regulations issued by CFPB?" My quick reaction to the hundreds of new mortgage rules recently issued by CFPB, contained in 804 densely packed pages, is that the agency has done a creditable job in an incredibly difficult situation. The rules cover a lot of territory, but those pertaining to borrower affordability probably have attracted the most attention. This article will comment on the new affordability rules, leaving other important issues for future columns. The regulatory focus on affordability reflects our recent experience with a housing bubble -- a period of self-reinforcing home price escalation. The bubble induced lenders to liberalize mortgage underwriting rules, relax enforcement of the rules, and approve loans to borrowers who could not afford them. The bubble burst early in 2007 when house prices stopped rising and started to decline. The Dodd-Frank bill passed in 2010 was a reaction to the excesses of the...