The banking regulatory bill currently under consideration in the Senate could make getting a mortgage from a community bank or credit union easier, CNBC staffer Sarah O’Brien reports.
In simple terms, the changes would let smaller institutions — those with up to $10 billion in assets — offer mortgages that are not subject to some of the strictest federal underwriting requirements, as long as they meet certain other conditions.
In 2010, Congress passed the Dodd-Frank Act, which enacted a variety of regulations to better protect consumers from risky mortgages. One of Dodd-Frank’s provisions was the creation of a "qualified mortgage." Basically, if lenders meet a variety of strict guidelines — such as ensuring a borrower's loan is no more than 43% of their income — they get legal protection if a consumer later makes a claim that they were sold an inappropriate mortgage.
The Senate bill now under consideration would let those smaller banks and credit unions still qualify for those legal protections without meeting all of the requirements that typically go with underwriting qualified mortgages.
But, O’Brien notes, the bill would still require them to assess the borrower's financial resources and debt as part of the underwriting process.
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