Local banks preparing for higher mortgage lending standards - WNCT

Local banks preparing for higher mortgage lending standards

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WASHINGTON, N.C. -

A federal law forcing banks to raise mortgage standards is set to take effect. And it's in place to protect you. But it could also make it tougher for you to buy a house.

Banks in Beaufort County and across the East are preparing for new regulations that could affect your ability to get a mortgage loan.

"It certainly does enhance or increase some of the work that we have to do internally," said Bruce Elder, the CEO of First South Bank. "We've been studying the regulations for some time and adopted processes and procedures that we've put in place to be able to deal with those regulations effectively."

Starting January 10, lenders will have to collect more documentation showing that borrowers can pay back their loans, documentation like proof of income, credit history, and a list of unpaid debts.

Elder says this could make it harder for unqualified borrowers to get a loan.

"There is some concern that potentially homeownership could decline as a result of these regulations, but again, I think money is available. You simply have to meet the new qualification standards," he said.

President Barack Obama in 2010 signed the law, called the Dodd-Frank Wall Street Reform and Consumer Protection Act, in response to the risky lending that contributed to the collapse of the housing market and the recession.

"I like the law," said Chocowinity homeowner Beth Harden.

Harden believes the law will help prevent foreclosures for people who can't afford their homes, like her friends whose debt was so high, their families had to help pay it back.

"They were embarrassed and then for some it was a reality call. 'We have too big a house. We should have never done this,'" she said.

The new law also caps the amount of fees lenders can charge. It's designed to prevent another housing crisis.

The law is named after two members of Congress, Chris Dodd and Barney Frank, who crafted the bill.

"Homeownership is not for everybody, even though we've been sold the American dream that it is," said Washington visitor Megan Lynch.

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