NeWS to KnOW

If courts are able to write down the value of mortgages in the event of a bankruptcy, lenders will face new financial risks because the value of the home – which is in fact the collateral for the loan – will be in question. The MBA says that, ultimately, all home loan borrowers will pay the price as lenders will be forced to offset their risk by requiring borrowers to put more money down, pay higher closing costs, and pay higher interest rates of 1.5% to 2%.

"Congress is, quite laudably, attempting to help consumers who face difficulties paying their mortgages," Kittle said. "But this law will, ironically, create future difficulties by increasing mortgage costs. The last thing homeowners need in this market is higher mortgage payments.”

On average, a 2% rate hike would increase monthly payments by $336 for a borrower wanting to take out a home loan for $250,000. If that’s unaffordable, that borrower is faced with buying a home that costs about $50,000 less - so that 2% rate hike would decrease a borrower's buying power by a whopping 20%.