Friday, December 20, 2013

New Rules For Mortgage Loans and How It Will Affect YOU!

The New Rules for Mortgage Loans call Qualified Mortgage Rule or (QM) will take effect on January 10, 2014.
What are these new rules and how it will affect you?
A Qualified Mortgage is one that meets certain standards set forth by Bureau of Consumer Financial Protection (CFPB) Two distinctive classification are Safe Harbor QM or Rebuttable Presumption (or HPML QM)
Safe Harbor; Most lender would most likely follow the ATR requirement and do already with most loans. With the provision if a borrower ends up in default/foreclosure down the road, the lender would be considered to have legally satisfied the Ability To Repay rule. Thus making it harder for the borrower to sue the lender in court.

Here's a list of Ability To Repay Determinations;
1. Current or reasonably expected income or assets
2. Current employment status
3. Monthly payment on the covered transaction
4. Monthly payment on an simultaneous loan
5. Monthly payment for mortgage related obligations
6. Current debt obligations, alimony and child support
7. Monthly debt to income ratio or residual income
8. Credit history
Rebuttable Presumption; This is related to higher-priced loans. Rebuttable Presumption assumes the creditor complied with the Ability-To- Repay rule and if followed even on a higher priced loan the consumer would have to show at the time of consummation the consumer’s income and debt obligations left insufficient income or assets to meet living expenses.

What defines a high priced mortgage is a loan with APR greater than Average Prince Offer Rate + 1.5%. High prices is not related to Points and Fees test. The APOR or Average Prince Offer Rate means an annual percentage rate that is derived from average interest rates, points and other loan pricing terms.


So you’re probably wondering how it will affect you the home buyer or home owner who is looking to finance. We’ve already been dealing with and adjusting to a tighter lending market with many added restrictions since Dodd–Frank Wall Street Reform and Consumer Protection Act. This new QM addition to the rules and restrictions to the lending industry is going to have an initial effect slowing the marketing until the lenders get their own houses in order, the first few months of 2014 is going to be slow with many delays if you happen to be a buyer or someone refinancing. I would advise adding a couple weeks to your escrow closing date. The interest rates are expected to reach 5.5% by end of 2014. With the added DTI ceiling of 43% and increase in rates, both factors are going to make it even more difficult to qualify for a home loan. This will have a negative impact on our housing market and its slow recovery at least in the beginning. On the up side there will be fewer foreclosures in the future and fewer lawsuits.
If you are a trying to qualify for a mortgage you still have many options. The dream of home ownership is NOT slipping away. You will need to be cautious and more diligent with your consumer credit. Most American’s carry far too much consumer debt. Set your goal of home ownership and find out where you stand. Work with a mortgage professional that will help you meet that goal by telling you what you need to do to reach it. There are still a few of us out there that do this type of counseling/coaching for home buyers.
I wish you the very best of luck in your home ownership journey. Stay positive and you will get there.
Contact me anytime, leave a comment or ask a question. I would love to hear from you. 

Roxy Redenbaugh
ACMC Loan Consultant
Branch Manager
NMLS #269926


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