NEW YORK (TheStreet) -- The mortgage industry is in for several changes in 2014, with new rules going into effect, interest rates poised to move higher and a new head at the Federal Housing Finance Agency, regulator of bailed-out housing finance giants Fannie Mae (FNMA) and Freddie Mac (FMCC).
The outlook for mortgage credit, therefore, is rather cloudy. On the one hand, banks might take time to adjust to the new rules, which could curtail credit.
On the other, clarity around new rules and a broad push by Washington to ease access to credit for more borrowers could lead to some loosening in mortgage lending standards.
Beginning this year, lenders will be prohibited from extending mortgages to borrowers who cannot afford a mortgage under the Consumer Financial Protection Bureau's new ability-to-pay rules.
Abusive lending practices that were widely prevalent in the boom days such as negative amortization loans and mortgages with a term greater than 30 years would be effectively banned.
Banks will instead receive greater protection if they make so-called qualified mortgages, which, among other things, limit the amount of debt a borrower can assume to 43% of his income.
And there could be more rules that force banks to retain a certain amount of the mortgages they originate on their balance sheet in order to rein in risky lending practices.
Still, while there have been fears that the new rules would severely curtail credit -- by some estimates, about half of the mortgage market could be eliminated in the long run -- the impact of these rules in the near term is relatively benign.