NEW YORK ( MainStreet) — Coming in the New Year are some big changes courtesy of the Dodd-Frank law. The law is designed to ensure that payments on housing loans are reasonable, but it is also going to come with a lot of red tape and double-checking at exactly the same time payments are going down. Some experts have already expressed concerns about how smaller lenders may fare with the change in the law. Could they be forced to sell out to larger lenders, or will homeowners simply be hit with more fees? Alternatively, could it have a minimal impact?

First off, there are more stringent rules for vetting loan candidates, as well as laws designed to help keeping lenders from steering people into exotic mortgagees. There is also a new five-year escrow rule for some high stakes mortgages. The main concerns are that these new regulations will tie up funds, create extra costs in vetting candidates and keep new borrowers out.

Are these concerns grounded?

"The new rules couldn't come at a worse time," said Brian Koss, executive vice president of Mortgage Network in Danvers, Mass. "The government is making all lenders tighten up their business at the same time it is trying to jump-start the economy. While employment has come down a little bit, housing prices and interest rates are going up and affordability is shrinking." This creates an environment where small lenders struggle, potentially shuttering and getting wrapped up into larger companies.

Some lenders have a more optimistic take on the new rules. Neena Vlamis, president of A and N Mortgage Services in Chicago spoke about the changes to the law in a more positive light.

"The new rules which are required by the Dodd-Frank act simply require us to evaluate some of the borrowers qualifications which we have been doing all along anyway," she said. "When a loan officer at A and N is interviewing the borrower, we already are determining if the borrower can repay the mortgage or not." A and N already takes into account the QM factor (a qualified mortgage), judging whether or not a borrower will be able to repay his mortgage.

What is the worst-case scenario for the clients of smaller lenders? Well, it could mean that your mortgagee company changes. Timothy G. McFarlin, a managing partner at McFarline LLP, was kind enough to outline the worse case for smaller lenders.

"This will likely wash out many smaller lenders and consolidate the industry so that business flows primarily to larger institutions such as Wells Fargo, Chase, B of A, who have the resources to undertake compliance with the new regulations," he said. "Government regulators are openly attempting to push larger banks into all segments of consumer finance and consequently eliminate many smaller lenders." The justificatrion here is that it will drive down lending costs, but ultimately the effect will mean less financing available to certain high-risk segments of the community. That's similar to what happened in the mortgage origination marketplace a few years ago.