"Liar Loans" Return

February 25, 2020 Mortgage Refinance,Mortgages

MoneyTips

When it comes to dealing with risk, America’s housing market struggles with balance. How can lenders offer affordable home mortgages for more Americans and still maintain proper safeguards?

The Great Recession was driven in part by overly risky loans that were packaged as securities and sold to investors who were unaware of the underlying risk. The resulting housing market collapse led to the Dodd-Frank regulations that regulated mortgage lending and applied credit-tightening safeguards.

Most of those safeguards are still in place, but loan offers are starting to creep back into risky territory – and investors are happy to buy up those loans looking for returns.

Dodd-Frank instituted qualifying mortgage rules – a set of lending restrictions that must be met before loans can be purchased by the mortgage loan backers Fannie Mae and Freddie Mac. Riskier unqualified loans may still be granted, but lenders don’t receive protections associated with qualified …

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