There are a number of new mortgage rules that will take effect on Friday January 10, 2014. The new rules are designed to expand consumer protections under the Dodd-Frank Act. These rules will impact most consumers with lenders that must comply with an array of new regulations.
The Consumer Financial Bureau (CFPB) was created to implement the new regulations that are intended to improve accountability and transparency in the financial system and to protect consumers from abusive financial practices.
One of the new rules is the Ability to Repay (ATR) Rule requires lenders to make a good-faith determination that a borrower has a reasonable ability to repay the loan. This includes verifying income and assets, current employment, monthly mortgage payment, other monthly payments or loans, monthly payments for mortgage related expenses, debt obligations, debt-to-income ratio and credit history.
Qualified Mortgages are a must – certain standards are set to prohibit riskier loan features like negative amortization, interest-only periods and loan terms longer than 30 years. There are also points & fees restrictions…
Homeownership Counseling – a list of the 10 closest homeownership counseling organizations must now be provided to all loan applicants.
Appraisal Rule – the CFPB issued a new rule designed to make it easier to understand how the home value has been estimated before a borrower gets a mortgage loan and that a copy must be provided promptly after the initial inspection and after any adjustments other than typographical.
Adjustable Rate Mortgages (ARMs) – loans with ARMs are no longer qualified using the note rate. The shorter fixed period loans, up to 5 years, require the adding of the note rate + 2% currently and the 7 and 10 year ARMs will use the start rate + the appropriate index / a lower total combination.
I hope this info. is helpful for you and it all appear to be a sincere effort to protect the consumer.
Happy New Year!
Skip Yanick CMA
Certified Mortgage Advisor
(over $500,000,000 in loans funded)
PHH Home Loans
CB In-House Lender
4000 Legato Rd., Suite 100
Fairfax, VA 22033
Mobile 703 309 2350