The New Protection Agency sent out messages this week stating that it’s no longer going to be good enough be a Qualified Borrower… meaning the Underwriter feels you have enough on the ball to be able to buy the house and make the payments… now they want you to ONLY get the best rates if you obtain a Qualified Mortgage. This could easily mean that NO ONE, no matter how strong a borrower you are, could qualify with a “total” debt ratio of more than 43%. **
I’ve re-written this several times, taken out words like CRAP, and paying for PAST mistakes… but the bottom line is that the Consumer Financial Protection Bureau (CFPB) came out on Thursday with more than 800 pages of rules that will largely determine the availability and cost of mortgages.
Neither consumers nor creditors emerge as winners. Reminds me of the Health Bill that came out – with complications on top of complications.
One of the “rules” found in this mammoth document says that you can NOT exceed a total debt ratio of 43%. The complication with this is that there are people / households / who make income, that they pay taxes on, that an Underwriter might not COUNT in their income. Like Seasonal employment for a teacher. The Teacher has been working for the last 3 years – but each year they did something different – so the Underwriter didn’t want to count that income… if the total Debt was at 43.7%, and they had some savings in the bank, and good credit, etc., etc. That borrower could probably get a loan.
What if the Underwriter is counting a Car for that teacher – and there are 8 payments left? Should the Teacher lose the ability to get a loan because the Underwriter lost the Ability to use COMMON SENSE underwriting??
We’ve reported that Fed Chairman Ben Bernanke even noted that getting a mortgage was difficult given the already tight Underwriting guidelines… and that the FEES associated with a mortgage have more than tripled in the last 2 years.
The cost of complying with 800 pages of rules will not likely ease the difficulty of obtaining a loan… Six other federal agencies are also jointly developing qualified mortgage standards intended to reduce mortgage risk and stabilize the housing market.
Just me – but I do not feel that a) this is going to do much to “stabilize” the housing market – it’s just another slap in the face, like make sweeping changes to USDA Maps… and b) I wonder HOW MUCH MONEY it’s cost the Tax Payers who desperately WANT the Real Estate Market to recover to duplicate the Dodd Frank rulings across 6 agencies????
I’m mumbling here – I know it… but this is something that SOMEONE should be watching, besides the “Consumer Protection” folks. We are in NC – the HOME of Predatory Lending. We whole heartedly agree that rules needed to be put in place – but believe me, we are over documenting loans, and completely forgetting that there’s a QUALIFIED Underwriter approving them.
Our advice? Get a mortgage while you can qualify and the fees are still low. Call Steve and Eleanor Thorne 919 649 5058.
** I know that there’s a provision that says if the AUS system will take the loans (if Fannie and Freddie will buy them) then they can still be qualified mortgages. The PROBLEM with that is Investor Overlays.