If you are reading any trade publications or watching any industry related news channels, certainly you are hearing about all the major changes that have taken place in the mortgage industry as of January 10th, 2014 based on Dodd Frank. It sounds like alphabet soup; QM mortgages, CFPB; ATR……
What does this mean to the real estate community and how does it affect your job? The honest truth? I doubt you will see any major differences in how you go about your business. Contrary to the talking heads and numerous articles telling you that self employed borrowers can’t get loans, or it will be very complicated and difficult to get financing or you may be forced to pay cash, I don’t expect you to work any differently.
Most lenders had already discontinued using any of the perceived risky programs and there was already limited use of 40 year mortgages or interest only or 3% down loans, all of which have met their death with the new guidelines. The one aspect that will make a difference to you is the debt ratio being curtailed to 43%. (Debt ratio means all housing expenses plus all monthly liabilities added together can not be higher than 43% of the borrowers gross monthly income) . That is part of the QM, or Qualified Mortgage portion of the act. However, many banks will still provide loans to those that have higher ratios as long as they have compensating factors such as higher down payments or healthy reserves. This is covered under the ATR or Ability to Repay guideline. As long as Freddie or Fannie gives an automated approval, you will still be able to exceed the 43% if it makes sense.
The Dodd Frank act is several thousand pages long. Countless dollars went into the compilation of the report and even more analyzing how lenders will comply. That is all being handled behind the scenes by compliance departments and there will be changes and growing pains as we move forward for the lending community.
I don’t mean to discount the benefits and changes that will be achieved based on the new rules because there certainly was a need. But bottom line…..work with a lender you trust and have a relationship with and this process and all the new rules should not derail your plans to have a productive and positive year in 2014. There are still thousands of programs to choose from to make responsible loans that benefit your clients.
***the article above is the opinion of the author and does not reflect on any investors or banks for which she is affiliated. Except in a good way!
