New rules designed to make sure borrowers can repay their mortgages haven’t curtailed the ability to buy a home, a Federal Reserve study says. The Fed, as part of its annual look at home mortgage disclosure data, looked at the impact of ability-to-repay and qualified mortgage rules put into affect in January 2014. The new rules were created by the Consumer Financial Protection Bureau as mandated by the Dodd-Frank bank-reform law. The rules require lenders to make sure home buyers can afford a mortgage. Lenders have to verify a customer’s income, debt load and credit history, among other things. And in most cases buyers can’t qualify for a mortgage unless the ratio of debt to income is 43% or below. The Fed study didn’t find any evidence of credit restriction as a result of the rules. For instance, black and Hispanic borrowers, who tend to have fewer assets and lower credit scores, actually saw their share of mortgages rise in 2014 after several years of decline. There also wasn’t much of a change in the frequency in which debt-to-income was cited by lenders as a reason for denial (it rose slightly for purchase applications and fell slightly for refinancing). The Fed suggests the new rules had little effect because lenders had already tightened standards after the 2008 financial crisis. Lenders may also have adjusted to the new rules prior to implementation. The study does concede that the market could have evolved differently in the absence of those rules. The report also showed that the number of new mortgages tumbled last year by 31%. A 55% drop in refinancings easily offset a 4% rise in mortgage originations. In another finding, the study revealed that the Federal Housing Administration has lost market share, perhaps a result of increases in mortgage-insurance premiums that started in 2010. Independent mortgage companies were the biggest beneficiaries, revving up their market share, to 47% of primary owner-occupied mortgages and 42% of refinancings. Those are the highest levels since at least 1995. By origination, the top mortgage lenders in 2014 were Wells Fargo WFC, -5.33% , Quicken Loans, Bank of America BAC, -3.78% , J.P. Morgan Chase JPM, -4.44% , U.S. Bank USB, -3.31% , Flagstar Bank, Citi C, -1.54% , PNC PNC, -4.23% , Nationstar Mortgage, loanDepot.com and Freedom Mortgage.
A Federal Reserve study has shown that rules passed as part of the Dodd Frank regulation, which was intended to ensure that house buyers could afford their mortgage repayments, has not curtailed the ability to buy a home. The study suggested that the new rules had little effect because lenders had already tightened standards after the 2008 financial crisis. Banks may also have adjusted to the new rules prior to implementation.