New mortgage rules designed to prevent a repeat of the 2007-2009 financial crisis, when foreclosures spiked because of risky bank practices, were finalized by the U.S. Department of Housing and Urban Development on Wednesday. The agency said the changes are based on work by the U.S. Consumer Financial Protection Bureau, which completed its own mortgage rules earlier this year. The HUD rules, which were mandated by the 2010 Dodd-Frank Wall Street reform law, will require so-called qualified mortgages to have certain safety features designed to protect consumers.
Qualified mortgages, which are backed by the federal government, cannot exceed 30 years or have risky features such as interest-only payments. In addition, these loans must limit upfront points and fees that are charged to home buyers to no more than 3 percent, with adjustments to facilitate certain other smaller loans, HUD added.
Lenders and consumer groups have anxiously awaited the rules, which are among the most controversial provisions of Dodd-Frank.