The New Year is almost here, and with it comes a bevy of legal and regulatory changes, especially for the mortgage industry. To help potential homebuyers understand how the changes will affect their mortgage processes, Don Frommeyer, CRMS, President of NAMB (The Association of Mortgage Professionals), outlines some of the regulations set to start in January 2014.
“Since 2009, the housing market has been working to create standards and regulations that minimize the risk of another mortgage industry fiasco,” says Frommeyer. “The ability-to-repay mandate is a perfect example of this and it exemplifies how mortgage professionals are taking extra caution with every customer.”
Upcoming mortgage industry changes include:
- Ability-to-Repay Mandate: The CFPB designed this regulation to set a gold-standard for lending to ensure each and every borrower is a qualified borrower. Lenders will follow a set of guidelines to establish a consumer’s income, assets and obligations before deeming them eligible. The CFPB rules establish a standard for what the government considers a “qualified mortgage.”
- Decrease in FHA Loan Limit: The Federal Housing Administration (FHA) announced that beginning January 1, 2014, mortgages will be limited to $625,000, down from $729,750. Homebuyers looking to obtain a larger loan will have to apply for a jumbo loan, which will most likely come with a higher down payment. “For many areas of the country this change won’t be a huge issue as average home prices fall below the established limit. However, borrowers in metropolitan areas with higher average housing prices may face challenges when applying for mortgages as the 20 percent down payment associated with jumbo loans will be an enormous increase from a traditional loan’s 3.5 percent down payment,” notes Frommeyer.
- Caps on Loan Origination Fees: January 10, 2014 brings a rule for the Qualified Mortgage that points and fees on mortgages cannot exceed 3%.
- Tighter Regulations for Self-Employed: As the rules to create a QM (qualified-mortgage) take effect, people without a W-2 will face difficulty when they apply for loans. It’s more of a task for individuals to prove their debt-to-income ratio without the proper documentation, even if they have a high net-worth and perfect credit. The income is calculated bringing into play the customer write offs to reduce taxable income.
For more information, visit www.namb.org.
Realtor® University Happenings: Interested in becoming a “green” real estate professional? Green 100: Real Estate for a Sustainable Future, the first day of curriculum for NAR’s Green Designation, serves as the foundation for this designation program. This course helps students understand the role of real estate in finding the balance between people, planet, and prosperity. Learn more here.
Copyright© 2016 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.
Content on this website is copyrighted and may not be redistributed without express written permission from RISMedia. Access to RISMedia archives and thousands of articles like this, as well as consumer real estate videos, are available through RISMedia's REsource Licensed Content Solutions. Offering the industry’s most comprehensive and affordable content packages. Click here to learn more! http://resource.rismedia.com