Archives for 2013

I think the Wall Street Journal breaks out the “New Rules”  The Best

 

01. What is a qualified mortgage?

Congress amended federal lending laws in 2010 to give greater legal rights

to borrowers who get mortgages they can’t afford. The new law, part of the

Dodd-Frank financial-regulation overhaul, said if banks made a qualified

mortgage—one that meets certain easy-to-identify criteria—regulators and

courts would presume that lenders had reason to assume a borrower could

repay.

02. When do the new rules take effect?

In one Year.

03. What is the Consumer Financial Protection Bureau’s role?

Congress left it to the agency to spell out the definition of a qualified

mortgage.

04. Do qualified mortgages have a minimum down payment or credit

score requirement?

No. Instead, the rules focus primarily on documenting a borrower’s ability to

make monthly payments.

05. What kind of loans won’t be qualified mortgages?

Certain product types are excluded, including interest-only loans that don’t

require principal payments, and loans where the principal balance rises over

time. Beyond that, banks must verify a borrower’s income, credit, and

employment. Borrowers who take out jumbo mortgages, or those too

expensive for government backing, can have no more than 43% of total debt

as a share of their pretax income.

Ten Questions on the New Mortgage Rules

January 10th, 2013

06. Will lending standards get tighter, looser, or stay the same?

It’s too soon to tell and there are diverse opinions on this point. David

Stevens, the chief executive of the Mortgage Bankers Association, said the

debt-to-income requirements for jumbo mortgages could tighten standards

for those loans, which have already become much harder to get. “It will

restrict credit on the margin over the current environment and that’s

something we cannot afford,” he said. Mark Zandi, chief economist at

Moody’s Analytics, has said that the rules are likely to lock in today’s

stringent income-verification and credit standards. That would keep in place

a lending regime that many top policy makers, from Federal Reserve

Chairman Ben Bernanke to Treasury Secretary Timothy Geithner, have said

may be too tight.

Others say the rules should provide certainty that lenders have been craving

and encourage them to ease their standards, though non-qualified

mortgages could carry higher costs for borrowers. The new rules should help

convince private mortgage investors “that it’s safe to come back in the

water,” said John Taylor, chief executive of the National Community

Reinvestment Coalition.

07. Will banks make loans that aren’t qualified mortgages?

Lenders can make loans not considered qualified mortgages, but most say they won’t, at

least initially, given the legal liability

Fannie Mae and Freddie Mac

Still, Mr. Taylor says that over time, a market should develop for nonqualified

mortgages. “Where there’s money to be made, and where it’s clear

that something illegal or predatory is not occurring, there will be a market for

it because there will be a better rate of return,” he said.

January 10th, 2013

08. Will certain loans become harder to get?

Yes. Many exotic mortgages that proliferated during the subprime heyday

have disappeared; they are now less likely to come back. Lenders also may

be more reluctant to make other loans that have been popular in more

expensive housing markets and among affluent borrowers, such as interestonly

mortgages.

Whether such loans will be securitized may depend on how ratings agencies

interpret the potential costs of the new rules.

09. Are there certain lenders that will be at a disadvantage because of

the rules?

Most qualified mortgages will have a 3% cap on the amount of fees and

origination costs that lenders can charge. Mortgage brokers are concerned

that the way in which that rule is implemented could hurt their business

model. In addition, mortgage units run by home builders and real-estate

brokerages could be hit because any costs from affiliated services that they

offer—say, title insurance or legal settlement services—would count towards

that 3% cap. If borrowers get those services from third parties that aren’t

owned by the brokerage, then the costs don’t count towards the cap.

Builders often encourage buyers to use their affiliated services, saying

they’re more convenient. But consumer advocates have long worried that the

practices are anticompetitive and can lead them to pay higher fees.

10. What happens if a borrower decides his loan is unaffordable?

Borrowers can sue the lender or the investor for damages. Banks that prove

they met the qualified mortgage definition will have a greater shield from

liability for loans that carry a prime rate, and a smaller shield on high-cost

loans, which are typically made to subprime borrowers.

January 10th, 2013

Can you Guess how this is going to Impact getting a loan Moving forward? 

La Mirada, Long Beach, Lakewood and Downey California can you  see what is in store for you?  Let me help you get the loan that you deserve,  good rates, low cost.