As 2014 begins, a bureau created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, The Consumer Financial Protection Bureau (CFPB), will set new rules concerning mortgages. Lenders will be required to verify and inspect borrowers’ financial records. The rules discourage lenders from allowing borrowers to carry total debt payments totaling more than 43 percent of the person’s annual income.

That debt also includes existing debts like credit cards and student loans. Starting January 10th the CFPB will put into force a national standard for issuing mortgages that could help prevent the housing crash of 2008 and 2009. Earlier in 2013 CFPB director Richard Cordray called the new rules “the true essence of responsible lending.”

All kinds of consumer advocates and mortgage professionals are lauding the new CFPB requirements. The new rules not only provide more responsibility for lenders, but it also protects them from lawsuits. Lenders are going to be crossing their t’s and dotting their i’s like never before.

On the downside, there will be a big number of people who should have been able to qualify for mortgages that won’t be able to and will be shut out of the home-buying market. If you add to that the fact that mortgage rates have risen in the past 6 months and are predicted to gradually move up to the mid 5 percent range by the end of 2014, you can see that the mortgage market will be shrinking.

Others have commented that there’s a good chance that limits on the size of some popular mortgages will be lowered during 2014. CFPB director Corday noted that in the years leading up to the 2008 financial crisis, consumers could easily obtain mortgages that they could not afford to repay. In contrast, in subsequent years banks tightened lending so much that few could qualify for a home loan.

The new rules seek out a middle ground by protecting consumers from bad loans while giving banks the legal assurances they need to increase lending. The new rules will limit offers like teaser rates that adjust upwards and large “balloon payments” that must be made at the end of the loan period.

They include several exceptions aimed at ensuring a smooth phase-in and protecting access to credit for underserved groups. For example, the strict cap on how much debt consumers may take on will not apply immediately. Loans that meet separate federal standards also would be permitted for the first seven years.

Balloon payments would be allowed for certain small lenders that operate in rural or underserved communities, because other loans may not be available in those areas. The bureau also proposed amendments that would exempt from the rules some loans made by community banks, credit unions and nonprofit lenders that work with low- and moderate-income consumers.