New mortgage lending rules hit the us this week

The headquarters of Fannie Mae, one of the major US lenders Photo: FutureAtlas.com

The rules, written by the Consumer Financial Protection Bureau and required by 2010's Dodd-Frank Wall Street oversight law, are not dissimilar to changes heading to the UK this spring too, as the recession-hit countries try to eliminate risky lending and avoid any future housing crashes.

Indeed, the financial crisis was sparked by borrowers being granted loans that could not afford. Now, lenders will have to verify that borrowers can afford their loans, taking into account factors such as the consumer's existing debt, credit history and income.

The regulations, which were initially greeted with a negative reception, have been softened to assuage fears that banks would be unable to lend to anyone, although some are concerned that the responsibility placed upon banks would see lenders open to legal action should a borrower later default on a loan.

Such effects will take time to become evident, but in the short-term there is expected to be a slight slowdown in lending as banks train staff to comply with the new regulations and establish new mortgage processes.

"We do think there could be some short-term wrinkles in the January-February time frame as the cut-over occurs and lenders have to port over to new systems," aid Stan Humphries, chief economist at Zillow, told AOL Real Estate.