2014: A transformative year for lenders

Borrowers and lenders to operate under a new set of rules

According to Businessweek, more than seven years after the subprime bubble began to deflate, lenders and borrowers will begin operating under a new set of rules, with the new regulations about to phase in on Jan. 10. So what does this mean for lenders?

The 2010 Dodd-Frank financial overhaul law called for the newly created Consumer Financial Protection Bureau to write the rules, which will require lenders to evaluate whether a loan is affordable.

As commonsensical as that sounds, it was optional in the past.

After more than two years of comments, lobbying, and drafting, the bureau released its final regulations in early 2013. Lenders must now verify and document at least eight specific criteria, including income, assets, credit history, other debt obligations, and employment status, to determine whether a borrower has a reasonable chance of repaying the loan. If the lender doesn’t do all that, a homeowner who has trouble repaying the loan has grounds for a lawsuit.

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