Berkshire’s Peltier Says Mortgage Rule Clears Loan Path
Ron Peltier, head of the real-estate brokerage business at Warren Buffett’s Berkshire Hathaway Inc. (BRK/A), said a new U.S. Consumer Financial Protection Bureau rule setting lending standards could help banks extend credit.
The regulation announced today forces lenders to verify borrowers’ ability to repay mortgages and limits the liability banks can face if they originate loans that later sour. That protection should make banks less hesitant to lend, said Peltier, who leads Omaha, Nebraska-based Berkshire’s HomeServices of America.
“You’ve got some clear pathways to be able to do business, which I think has been lacking,” he said today in a phone interview. Banks “loaded with capital” didn’t want to lend because rules weren’t defined, he said.
Congress mandated that CFPB draft the rule in response to lax lending standards that contributed to the 2008 financial crisis. The bureau plans to issue other regulations as it reshapes the mortgage market to address past abuses. Mortgage bankers and real estate agents had warned that a proliferation of new provisions could make it harder for borrowers to access credit and hinder the housing recovery.
HomeServices, the second-largest U.S. residential real estate broker, has been making acquisitions as property markets rebound and home prices increase. The company said yesterday that it bought closely held broker Guarantee Real Estate to expand in central California.
The qualified-mortgage rule will cover home loans in the underwriting phase. Banks such as Charlotte, North Carolina- based Bank of America Corp. and San Francisco-based Wells Fargo & Co. (WFC) will be subject to the rule, as will non-depository originators.
In so-called qualified mortgages, borrowers can’t spend more than 43 percent of their monthly income on debt. Such loans get some protection against consumer lawsuits.
“It is clearly not going to be a solution for people that are on the margins trying to buy their first home and have questionable credit,” Peltier said. “Not everybody is geared to own and be responsible to be involved in a mortgage and try to pay for a house. Some people are just more geared for rental.”
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