Will mortgage lenders consider you to be a 'safe' bet?

Hands holding a house

The government's consumer watchdog soon will draw a line between what’s a safe, reasonable home loan and what’s just too risky.

And when the Consumer Financial Protection Bureau does that, buyers are going to end up on one side or the other.

Here’s hoping your down payment, income and credit qualify you for a "safe" loan. If not, you’re going to find it either much more expensive or much harder to get a mortgage.

The issue has 33 groups representing lenders, low-income housing advocates, Wall Street, homeowner's associations and real estate agents worried.

This is indeed an odd coalition of groups that don't always share the same interests.

Earlier this month, they sent the CFPB a letter asking it to be as broad as possible when it decides what’s a safe home loan.

Here's a look at some of the organizations that have signed on to the letter: American Bankers Association, Habitat for Humanity International, National Association of Realtors and National Housing Conference.

National Association of Realtors President Moe Veissi said he’s concerned a narrow rule would force people seeking to buy a home or refinance a home loan into a different market where they’d have to pay "significantly higher interest rates and fees or even be denied access to credit."

This safe or risky issue was brought upon us by the financial reform legislation Congress passed a couple years ago because banks were giving anyone who fogged a mirror a loan.

Today, banks have replaced the fogged-mirror test with the financial equivalent of a colonoscopy.

Yet the CFPB still has to come up with a rule explaining what constitutes a "qualified mortgage" and "ability to repay" a loan.

(Stay with me here because this really does matter if you plan to buy a home or refinance your existing loan.)

The bottom line is this: If you want a loan that falls outside whatever the CFPB decides is a safe, "qualified mortgage," or you lack "ability to repay," you’re going to pay a higher interest rate or just flat-out get denied.

And if the CFPB isn’t really clear about what’s a safe loan and what’s not, you can forget the financial colonoscopy -- banks are going to ask for a CAT scan of your finances and tighten their lending rules even more so you can’t come back later and sue them for giving you an inappropriate loan.

It’s too early to say what the CFPB is going to do in response to the letter, but you’ll get a chance to share your thoughts directly with the agency when it eventually proposes a rule.