Government

New Mortgage Rule: Don't Lend Money To People Who Can't Pay It Back

Dems from the House and Senate are hashing out a final finance-reform bill. Yesterday, they added a section that would impose new rules on mortgage lenders, the WSJ reports.

Among other things, it would enshrine into law what seems like the most basic tenet of banking: Lenders can only give mortgages to people who have a "reasonable ability to repay" based on their income, credit history and indebtedness.

The section a response to the securitization-driven mortgage mania of the housing boom, when an unemployed hamster could get a seven-figure, negative-amortization loan.

The banking industry has argued that it goes too far, and could make it harder for qualified borrowers to get loans, the WSJ says.

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