From January 10th 2014 some additional regulations are going to affect home loans. This was first brought about after the housing bubble burst and some Wall Street reform under the guise of a Consumer Protection Act was drawn up in 2010 and is known as " Dodd-Frank". The major points also known as the "Volcar Rule". So for about 40% is already implemented but some more rules and regulations are coming early in the New Year:
MAIN NEW POINTS:
- Monitor "Risk" of lending
- Banks must refrain from speculative trading
- No bank hedge fund inverting or investments with outside organizations speculatively investing
So the banks must not take risks with speculative investments or give out loans that could jeopardize the banks security and put themselves and their public at risk of needing a further bail-out when risks turn sour.
Congress has appointed five bodies to work together to implement former FED Chairman Paul Volcar's rule by year end. These are as follows:
- The Federal Reserve
- Office of Controller of the Currency
- The Federal Deposit Insurance Corporation
- The Securities and Exchange Commission
- The Commodity Futures Trading Commission
There joint task to draft policy to implement the "Vocar Rule" hence the impending regulations coming early in the New Year.
Basically the effect of these new regulations will be to hold back banks from taking the risks that could lose them money. By playing it safe they are less likely to go bust. On the other hand they are also less likely to have funds to lend to would be homeowners or homeowners who want to trade up.
Banks are not likely to lend unless the borrower can prove their income with pay slips or other evidence of income. Also banks will draw a line under loans amounting to more than 43% of income.
These regulations will not do anything to stimulate house prices rising nor will they stimulate housing demand in general. 2014 looks like being an interesting and demanding year for all involved with investments and with real estate in general.
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