Fresh mortgage rules to safeguard consumers from risky financial products has come into effect from Friday the 10th of January 2014. On the heels of its implementation, National Association of Realtors (NAR) have held an event which had Richard Cordray, director of the Consumer Financial Protection Bureau (CFPB) as its high-profile guest.

Cordray was quoted as saying that NAR would be active in assisting home buyers to access safer mortgages that would meet all the newly laid down stringent mortgage underwriting guidelines. During the same event, Cordray put forth some of the prepared remarks regarding the historic consumer protections his agency has planned to implement in the near future.

He said that the Ability-to-Repay rule is a simple one. According to him, these new mortgage rules would help into curb all forms of irresponsible lending that sent the economy into a tailspin and rattled the local housing market.

He further added that the new mortgage rules as well as the CFPB’s endorsed Qualified Mortgage (QM) standard would defend the interest of the consumers while keeping all lines of mortgage credit accessible to one and all. Participating in the event was NAR’s President-elect Chris Polychron, who himself is a realtor from Hot Springs, Arkansas.

Chris Polychron acted as the moderator in the event and welcomed CFPB’s move of creating a conducive and more healthy lending environment in the country. This, he said, would lead to the origination of mortgage loans that have passed the new set of lending rules.

Per the President-elect of NAR, constant mortgage lending regulations would go a long way in ensuring financial freedom of all the homeowners. Such stringent mortgage rules will inevitably prevent them from taking out inappropriate and unaffordable home loans, thereby providing the mortgage borrowers with an additional ring of financial security.

Cordray was found explaining the fundamentals of qualifying for a ‘Qualified Mortgage’. In accordance to the Ability-to-Repay rule, any borrower with a debt-to-income ratio (DTI) of more than 43 percent will be considered ineligible to apply for it.

Moreover, QMs cannot have certain risky features like making interest only payments or paying them off even when they are negatively amortizing. This way consumer would end up owing more than what they had actually borrowed before and were liable to repay. Actually, as per the rules, QMs should have relatively justifiable points and fees.

New mortgage rules also consists of a 3 percent cap on different kinds of points and fees that are usually associated with fresh mortgages. To NAR, these charges are somehow discriminating against the affiliated lenders since they have to bear certain additional costs in terms of fees and points as compared to any major retail banker or various other financial institutions such as escrow charges and title insurance charges.  

The issue with such regulations is that both affiliated as well as non-affiliated lenders get treated varyingly, as said by Polychron. He even said that NAR views such a rule to be a kind of disadvantage for a lot of real estate affiliated lenders that would reduce the number of credit choices for the consumers eventually left accessible to them and more so, because unaffiliated lenders will have to continue using a title company, thus payment received by them (the consumers) would be the same in any case.

That said, Cordray put on record about the Congress’ move to draw a line as to how much a lender can charge a borrower in terms of points and fees at the time of mortgage origination. However, as the new rules gets implemented, consumers, regulators and NAR can work together to monitor the market and analyze the limit’s effect on the supply of mortgage loans.

Cordray lauded NAR’s move to help with the efficient execution of the new mortgage rules. NAR has got workers at the grassroot level operating in both small and big communities across the length and breadth of the nation.

So, he urged all the people associated with NAR to help CFPB in spreading the word regarding the ways by which consumers can take all the advantages of this new agency. Working on the same line to provide timely, useful information to the countrymen, MortgageFit Community has loads of resources to discover on its official Facebook page: https://www.facebook.com/mortgagefit