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It seems so basic — require mortgage lenders to qualify borrowers based on their ability to repay the loan. Yet this wasn’t the case for many mortgages in the run-up to the housing crisis contributing to the mess we’re still in now.
Nevertheless, you can hear criticism of the new mortgage rules that became effective Friday. Under the federal government’s ability-to-repay rule, lenders must make a “reasonable, good-faith determination” that an applicant can afford the mortgage.
Critics say the stronger mortgage requirements could make it harder for people to qualify.
Yes, that’s the point. We had to move away from how things were. For the last several years, I’ve worked with many homeowners struggling under burdensome mortgages. I’d often look at their loan papers and shake my head. How could they manage such large monthly payments after some ridiculously low teaser rate expired? What were they thinking?
But I also want to smack the people who approved many of these mortgages. It may have been legal in most cases, but that didn’t make it right. The lenders should have known better.