New legislation may make it more difficult for anyone to take out a loan, particularly those in unconventional circumstances.

Congressman Barney Frank is currently pushing legislation that would require banks to hold on to at least a portion of each mortgage they create, instead of selling the entire loan to investment groups.

A recent Reuters article reports:

“He said part of the reason the country finds itself in its current fiscal crisis is a shift from traditional bankers, who made loans but found themselves on the hook if the loans went bad, to complex financial deals that allowed mortgages to be combined and then sold — with little financial risk to those making the loans.

‘If only banks made mortgage loans, there would be no crisis,’ he said.”

As most borrowers know, the mortgage market is very tight right now. Although these laws may curtail another mortgage meltdown, they are likely to make it even more difficult to take out a loan in today’s market. Perhaps we’ll see yet another influx of borrowers seeking creative financing in the months to come.

photo credit: rjs1322

See Also:

FHA Mortgage Guide

Tags | banks, creative financing