[ by Larry Goldfarb ]

Dodd-Frank Rules, with Basel III Capital Requirements, Likely Means Fewer Mortgages.

A report from the American Action Forum says that pending mortgage regulations could lock today’s tight lending standards in place and result in nearly 20% fewer mortgages being issued in the coming years. The report provides an estimate of the potential impact of three important mortgage regulations set to take effect next year:

The new rules will:

• raise the cost of borrowing for millions of home buyers

• tighten access to credit beyond pre-boom standards, a period of much more responsible lending than in the lead-up to the housing crisis

Of course, regulators have yet to finalize the “qualified mortgage” and “qualified residential mortgage” rules. As a proxy for where those rules might land, the report roughly assumes that today’s tighter lending standards won’t return to those that prevailed before the housing boom as a result of the impending regulation.

While no one is arguing for a return to the lax standards that prevailed during the housing bubble, Mr. Holtz-Eakin said he’s surprised that more policy makers haven’t focused on the potential impact on the housing market should regulation enshrine banks’ current defensive position when it comes to making mortgages.

Consumer advocates say they are cautiously optimistic that the Dodd-Frank rules can ensure stronger consumer protection without limiting new lending.  "If Dodd-Frank is done right, we should see somewhat expanded lending from what we have right now,” said Julia Gordon, housing policy director at the Center for American Progress, a liberal think tank.  "It’s important to raise these concerns, but it’s also important to be specific, and not just anti-regulation."

For further details, go to:  [WSJournal, 10/26/12].