Mortgages Get New Rules

Do you qualify?

The San Diego Union Tribune posted this informative article on Jan 31st, 2014:

"If you need a mortgage to buy a home this year, the government wants to make sure you can pay back your loan.

That’s why on Jan. 10, the Consumer Financial Protection Bureau implemented new mortgage-lending rules that federal regulators say will protect against the risky lending practices that powered the housing bubble and caused a huge collapse in home prices that led to the Great Recession.

For most home loan borrowers, the new rules will have little or no impact on whether they can get a mortgage, experts say, because loan standards have already been tightened.

“They want to make sure lenders are giving loans to borrowers who can afford to pay back those loans,” said David Neylan, vice president of correspondent and wholesale lending at Guild Mortgage, which is based in San Diego.

Here’s a look at the new rules and what they do:

Q: What is new?

A: The big term you need to know is qualified mortgage, or QM. A qualified mortgage meets new guidelines, and consumers who get them are expected to meet ability-to-repay requirements. If lenders make qualified mortgages, they have more protections against lawsuits should the loans later go bad.

Q: What are the qualified mortgage requirements?

A: These loans cannot:

• Contain terms that exceed 30 years.

• Include interest-only payments or payments that are less than the full amount of interest so that the home loan debt grows each month.

• Charge more than 3 percent in upfront points and fees for loans above $100,000.

• Contain balloon payments.

• Push a borrower’s total debt load above 43 percent of his or her monthly income. There are some exceptions when the debt load can exceed the limit. If the loan is eligible to be backed by Fannie Mae or Freddie Mac, or a federal housing agency such as the FHA, for example, that debt load could be greater.

“The risk has gone down significantly because the qualifications are pretty tight. They have to fit into this perfect box,” said Annemaria Allen, CEO of The Compliance Group, based in Carlsbad.

Q: Can a lender still offer a mortgage to borrowers outside these rules?

A: Yes, but lenders wouldn’t have the same protections if the loan goes bad.

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Q: Do the new rules include down-payment requirements?

A: No. There are no down-payment requirements. There was an idea floated to require 20 percent down, but it did not happen."

To read the full article, go to:  http://www.utsandiego.com/news/2014/Jan/31/qualified-mortgages-cfpb-fannie-freddie-loans/?#article-copy