In the years following the financial crisis, it came to light that the standards for qualifying loans for mortgages were insufficient at best. Foreclosures were very much at the heart of the 2008 financial collapse. Amidst this collapse, many homeowners have sought to block the bank’s foreclosures of their home on the grounds that the lenders knowingly put them in mortgages that they could not afford. Banks claim that such suits have cost them billions of dollars. And, according to the banks, they have been hesitant to give out new loans to any kind of consumer. None of this addresses whether the suits were valid and whether banks had a legitimate interest in overselling loans in the first place. But instead of addressing these issues, Federal regulators have begun to explore means to insulate banks from any future liability.
Those regulators have begun looking at blocking suits from future borrowers. Essentially this would set a unified standard for “qualified mortgages.” Any borrower who purchased a “qualified mortgage” would be barred from suing their bank. Subprime mortgages, which were at the center of the original housing collapse, would not have to meet the standards of a “qualified mortgage.” Those borrowers would still be able to sue their lenders for placing them in improper loans.