New Mortgages ... Rule!

Below are some details on the Fed's proposed new mortgage rules courtesy of Briefing.com:

• New final mortgage rules ban prepayment penalties if payment can rise in first 4 years.
• New rules create category of 'higher-priced mortgages' including virtually all subprime loans.
• Lenders must verify repayment ability from income, non-home assets for higher-priced mortgages.
• Lenders must assess repayment ability on highest scheduled payment in first 7 years of mortgage.
• Lenders must establish property tax, insurance escrow on higher-priced first-lien mortgages.
• Lenders may offer borrowers opportunity to cancel escrow account after one year.
• Creditors must provide estimate of mortgage costs, payment schedule,within 3 days of application

If mortgage regulators can enforce their new rules on "higher-priced mortgages," at least as well as they do for "high-cost mortgages," (which they actually do surprisingly well) this new category of home loan means one thing: don't bother applying for a mortgage unless you have nearly spotless credit and money in the bank.

And while many would argue this is a much needed change in the mortgage market, it does raise a few questions:

• Won't this further increase demand for rental units?
  
• Won't this force people to save if they want to own a home?
  
• Isn't money saved different than money spent?
  
• Where was this legislation in 2006, at the height of the boom, even when regulators knew what was going on?
  
• Why do regulators seem to focus so much on making new rules, rather than enforcing the old ones?
  
• If the mortgage market figured out how to get around the old, "high cost loan" limitations, won't it eventually work its way around these as well?