Recently I had a
chance to ask Jennifer Barth from Vitek Mortgage about the
many changes to 2014 mortgage rules. I wanted her to fill you in on the most important
things to keep in mind. I'm so appreciative of
her time and expertise. I definitely suggest visiting Jen's website to learn more
about her!
So
how will the new mortgage rules affect you?
FHA
loan limit decrease: Buyers who
need to borrow more than $474,950 (loan limits are county specific) will be
unable to use FHA financing and must apply for a jumbo loan. Typically, this
means that instead of making a down payment of 3.5%, borrowers will be required
to make a more significant down payment.
Ability-to-Repay/qualified-mortgage
rule: Borrowers without a lot of
debt won’t be affected by this new rule, but those who have a debt-to-income
ratio above 43% will find it harder to qualify for a loan unless they can reduce
their debt or boost their income. Self-employed borrowers will need to provide
more documentation of their income, and all borrowers will be required to
provide extensive paperwork to prove their income and assets.
Caps
on loan origination fees: Lender fees
will be limited to 3% of the loan amount, which means borrowers won’t be
overpaying for their loans. However, the cap on fees may make lenders less
likely to offer smaller loans. Another area that could be problematic is
if a buyer wants to buy down the interest rate. Given that fees are
limited to 3%, buying down an interest rate may not be possible.
Rising
guarantee fees: Lenders are likely
to pass on higher fees that they pay to consumers, which will add to the cost
of borrowing. That is on top of rising interest rates, which many experts are
forecasting will reach at least 5% next year. While that’s not high in
historical terms, rising borrowing costs mean that many people won’t be able to
get as much house as they had hoped. Still, some experts see an upside: Higher
rates may mean fewer loan applications in 2014. Tight competition between
mortgage companies for a smaller pool of applicants could mean that lenders
will loosen their standards a little and make it easier for some borrowers to
qualify for a loan.
New
mortgage servicing rules: Mortgage
servicers will be required to provide each borrower with a monthly statement
that clearly shows their interest rate, loan balance and escrow account balance
and an explanation of how their payment is being credited. Lenders will be
required to credit mortgage payments on the day they are received. “Dual
tracking” will no longer be allowed, which means that no foreclosure
proceedings can be started until a borrower is at least 120 days late and until
borrowers have completed a loss mitigation application and it has been
addressed by the lender.
Appraisal
delivery rules under Reg B and Z:
This rule requires that all appraisals and valuations be provided to the
applicant. Delivery to the loan applicant must occur at least 3 days
before closing escrow; this can potentially delay the closing date. This
rule does allow for waivers in certain circumstances.
