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
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.
