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OH NO!!! Here Comes Another Mortgage Rule To Make Loans Harder To Get!

OH NO!!! Here Comes Another Mortgage Rule To Make Loans Harder To Get!

 

Qualified Mortgage (QM) and Ability to Repay (ATR) are the newest rules to be implemented of the Dodd-Frank. Going into effect January 10th, there seems to be a lot of folks up in arms about it.   I have heard both lenders and real estate agents grumbling about this new rule that is going to cause more buyers not to qualify for mortgage loans.

 qualified mortgage qm

 

Probably Not.

These “new” rules are in place to make sure that lenders make sure that buyers have the ability to repay a mortgage loan…for the long haul, and that lenders are not putting a borrower into a loan that is not “good” for them.   

Lenders must make a reasonable, good faith, determination that the borrower can afford the mortgage payment and that they have income that supports expenses beyond the mortgage.

Guess what? 

Lenders have already increased the minimum credit score requirements, lowered the maximum debt to income ratio, and are already asking for a slew of documentation to prove income, assets and creditworthiness.

Here’s what I am telling you…these procedures are already in place at most lenders, QM and ATR just makes it “official”.

 

*PLEASE NOTE, there seems to be MISINFORMATION that the maximum total debt to income will be 43% after January 10th, 2014. THIS IS NOT CORRECT, though some lenders may limit the debt ratio at 43% for their loans.

According to the CFPB (Consumer Finance Protection Division) Qualified Mortgage Rule:

The General definition category of QMs is any loan that meets the product feature requirements with a debt-to-income ratio of 43% or less is a QM.

AND

 “GSE-eligible” category of QMs  [Conventional financing is often through Fannie Mae and Freddie Mac which are currently “Government Secured Entities”]any loan that meets the product feature requirements and is eligible for purchase, guarantee, or insurance by a GSE, FHA, VA, or USDA is QM regardless of the debt-to-income ratio.  

 

 

Basically this means that as long as a loan meets Fannie and Freddie, FHA, USDA AND VA guidelines and get an approve/eligible or LP Accept through Desktop underwriting, they are OK (for now anyway!)  

 

Borrowers, please note:

  • Assume that the underwriter will ask you for BOTH your first born and a blood test, anything less will be a win!
  • Hold on to ALL documentation, pay stubs, w-2’s, savings, checking, 401k.  Be able to provide written proof of all deposits that are not direct deposits (e.g. payroll, tax refunds, social security, etc.) 
  • Your loan officer and underwriter are not asking you for additional documentation because they want to frustrate you, or because they don’t believe you. We are asking because we may need to prove to anyone who has a right to ask, that we reviewed everything possible to ensure that you have the ability to repay the loan.

Provide the required documentation for a loan that is in your comfort zone and you will find yourself:

QM Qualified Mortgage

Warm Regards,

Bridget McGee  Maryland Mortgage Mama  NMLS# 196068  Corridor Mortgage Group.   410-960-2061 EHO   bmcgee@corridormtg.com or marylandmortgagemama@gmail.com

 

If you are considering purchasing a home in Maryland and want to be sure you are mortgage ready, my brother Tony and I will be happy to help! We help to make the mortgage process a pleasure! 

If you already own your home, we are happy to provide a no-cost mortgage review to help you to determine if refinancing may be in your best interest.  Please contact me at 410-960-2061.

Comment balloon 58 commentsBridget "Mortgage Mama" McGee • January 08 2014 08:59PM

Comments

All this does is discourage new buyers from taking shot at buying a home. There is so much misinformation out there. It is just another nightmare.

Posted by Bill Reddington, Destin Florida Real Estate (Re/max Southern Realty) almost 5 years ago

Hi Bridget,

I am hearing a lot about these new rules.  I think the DTI limit is a good idea.

Best of GREAT success to you in 2014!

Posted by Jordon Wheeler, J W Group Real Estate Sales and Service (The Jordon Wheeler Group) almost 5 years ago

Hi Bridget, want to see this post featured - so suggested. I guess, these are the challenges and where is the fun if there are no challenges? And as you rightly said, these guidelines are in-place already so why so much of a noise about this? Granted, it's going to affect a few! So what? People bought homes even when the mortgage interest rates were 3-5 times recent rates!

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) almost 5 years ago

Great post Bridget, thanks for spreading the word that these new rules are not the end of the world and are, in large part, already in place and have been for a little while.

Posted by John Meussner, #MortgageMadeEasy Walnut Creek, CA 484-680-4852 (Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA,) almost 5 years ago

Bridget:  All the hub-bub reminds me of the Shakespeare play "Much Ado About Nothing".  As you point out, much of what is "new" expectations, rules, etc. ... has already been put into play by most Lenders.  The media really needs to talk to real Lenders ... and catch-up, don't they??

Gene

 

Posted by Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi, 708.921.6331 - 40+ yrs experience (NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656) almost 5 years ago

I am ok so far with my lenders.  Not too many denied and one this week was only lacking one thing to get approved and that was a JOB!  Go figure he was turned down even with 80% down.  His thought... he woudl be back to work before the loan was 80% paid down so why did it matter. 

Posted by Florida Tolbert Team Keller Williams Advantage, Keller Williams Land Division Specialist (Keller Williams Advantage III Realty in Lake Nona) almost 5 years ago

The rules keep changing and changing. I know it has to be a headache to try to keep up.

Posted by Debbie Reynolds, Your Dedicated Clarksville TN Real Estate Agent (Platinum Properties) almost 5 years ago

Thanks Bridget for keeping us updated - much appreciated!  

Posted by Graziella Bruner, Associate Broker - Serving Wayne & Oakland County (NCS Premier Real Estate) almost 5 years ago

It's really sad that there's no personal accountability left & the only way to insure the banks are behaving correctly is to create loans to control their processes. Think this says more about a system fraught than anything ... and yes, the banks might have implemented this before but likely need legal enforcement to insure they're still doing it in years to come. 

Posted by Tina Gleisner, Home Tips for Women (Home Tips for Women) almost 5 years ago

Really not much has changed.  Most of the lenders we use already do this.  It really is back to how things were done before the bubble started in 2002.  We will all learn to work with it.  I do now have my clients get all documentation into the lender in the first 10 days we start working to avoid prpblems

Posted by Ric Mills, Integrity, Honesty, and Vast Real Estate Knowledge (Keller Williams Southern Az) almost 5 years ago

We did NOT need more government employees administering more regulations for loan officers to do their job.

I have NEVER had a home buyer be qualified for more than they were able to pay.  In all my years selling real estate, only one, that is ONE buyer lose their home and that was due to divorce, not because they couldn't pay the payment. 

The loan officers I have known have never, never tried to put a buyer in a home that would put their home ownership at risk.

Besides, I'm not a potted plant.  I know what buyers are qualifed for long before they get to a loan officer.

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) almost 5 years ago

Nice post! We will survive this too. There may be a few less loan officers and mortgage companies out there but there never really was a shortgage!

Posted by Paul McFadden, Pest Control, Seattle, WA. (Paratex) almost 5 years ago

Good post!

Posted by Peggy Wilson, Michigan Mortgage Pro (Huron Valley Financial, Inc.) almost 5 years ago

Bridget, I think this is a case where government regulators have gone off the deep end to over regulate the lending industry. The horse already got out of the barn.

Posted by Michael Setunsky, Your Commercial Real Estate Link to Northern VA almost 5 years ago

How refreshing, Bridget... a common sense approach to this situation!

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) almost 5 years ago

Wow, making sure a borrower can afford to pay back the money they borrow, what a novel concept. It is sad that the government had to make a rule like this for the banks to follow.

I am in South Florida and maybe things were different in the Virginia and Maryland area for Lenn, but for most of 2004 through 2007, the overwhelming majority of the loans we closed were stated income or no income loans. Ability to repay was an afterthought. 

As Bridget says, most lenders are already doing this so the real reasons for the rule are probably meant to calm the fears of the secondary market.

Posted by David M. Dwares, Title guy with a broker license (Title Professionals Corp.) almost 5 years ago

Fact is, we have to roll with these punches.  ATR and QM will have unintended consequences.  All of this sweeping regulation does.  But the best of us will continue to find a way to navigate these uncharted waters and get our clients through.

Still, you have to laugh at the absurdity of QM.  $750,000 loan with an LTV of 30% and a DTI of 44 will not qualify under QM.  $750,000 loan with an LTV of 80% and a DTI of 43 would...

Posted by Rob Spinosa, Vice President of Mortgage Lending, Marin County (Guaranteed Rate, Marin County, CA) almost 5 years ago

Great post Bridget. It may be tedious to get a mortgage, but I think in the long run it will prevent the onslaught of foreclosures that have plagued the market for years.

Posted by Juan Jimenez, The Richmond Home Inspector (A House on a Rock Home Inspections LLC) almost 5 years ago

We need a freeze on government intervention.  The pendulum has swung too far in the wrong direction.

Posted by Geoff ONeill (John L. Scott Medford) almost 5 years ago

Good Post Bridget, hopefully it slows down some of the misinformation.  People get up in arms about this stuff, but I think we should all remember the "pulse" loans didn't get us anywhere good.  Not everyone is ready for homeownership. 

Posted by Bryan Tobiason (Keller Williams Partners, Inc.) almost 5 years ago

Having gone through the 2004 scenario where fraud was rampant in the mortgage industry and people with $30,000/yr incomes were qualified for $650,000 homes, I like the idea of more qualifications for the buyers. While most realtors may not agree with me, in the long run it is good for both the mortgage industry and the housing industry that people are vetted for the home on the basis of potential payback as well as current qualifications. Stabilization is good for the real estate industry. I think it will help and not hurt the industry as much as people fear. Thanks for your post. It is helpful to read these things and learn of the new rules affecting our business.

Posted by Myra Gouger, RRG, ABR, SRES, CPDE, CPRES, Realty ONE, LV. You are my most important client. (Urban Nest Realty) almost 5 years ago

Great post Bridget.  I do think that this will prevent the quantity of foreclosures and short sales in the long run.  Also I think it will protect the homeowners.

Posted by Mary Ann Smith, (Keyes 786-278-6598 www.MarySmith.Keyes.com) almost 5 years ago

Doesn't affect many of our buyers.  But the few it does I'm not thrilled.  

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) almost 5 years ago

I'm happy to hear that some of this is misinformation. We don't need any additional hurdles to true recovery.

Posted by Jason Crouch, Broker - Austin Texas Real Estate (512-796-7653) (Austin Texas Homes, LLC) almost 5 years ago

"first born"....bwahahaaaaaa - yep, it DOES feel like that sometimes! I understand why, but sometimes Clients don't...at first.

Posted by Travis "the SOLD man" Parker; Associate Broker, email: Travis@theSOLDman.me / cell: 334-494-7846 (Team Linda Simmons, Enterprise, AL 36330) almost 5 years ago

Bridget,  thanks for this thorough update. You are right.  Many buyers are frustrated by the enormous amount of information they must provide to lenders.

Posted by Sharon Parisi, Dallas Homes (United Real Estate Dallas ) almost 5 years ago

Just went through all this and borrowers need to be reminded to have all the info you listed at their fingertips to avoid frustration and delays. Thank for posting!

Posted by Athina Boukas, Certified Residential Specialist (CRS) (Virginia Capital Realty) almost 5 years ago

The rules make sense to me and when lenders all become angels and do no wrong then we can eliminate all the rules. Trusr me, they won't become angels and you can look at the last 50 years of bubbles to prove that.

Posted by Joe Pryor, REALTOR® - Oklahoma Investment Properties (The Virtual Real Estate Team) almost 5 years ago

I suspect that they fact they make these rules will scare many lenders into being tighter than they need to be.  

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) almost 5 years ago

Bridget - I heard about this on the news this morning and really appreciate your explanation of these new regulations.

Posted by Donna Bigda, Greater New Haven CT Real Estate (RE/MAX Alliance) almost 5 years ago

Experiencing first hand how difficult it is - currently buying a home and cannot believe the documentation that my husband and I have had to supply - just received our commitment so very happy campers!  I too explain to my buyers that your will be asked numerous times to clarify deposits, income etc - if we explain to our clients clearly to expect this it may not come as such a surprise.

Posted by Roshan Quigley (Weichert Realtors - Manalapan/Marlboro, NJ) almost 5 years ago

Good Morning: This is some great Info,  keep up the good work and good luck with your 2014 business,  E

Posted by Ed & Tracy Oliva, The Oliva Team Arizona Agents (West USA Realty - Arizona) almost 5 years ago

Good Morning: This is some great Info,  keep up the good work and good luck with your 2014 business,  E

Posted by Ed & Tracy Oliva, The Oliva Team Arizona Agents (West USA Realty - Arizona) almost 5 years ago

Yes, well, we all need protection from ourselves or some nonsense. Just keep rolling with the punches, all. 

Posted by Paul Collier, Paul Collier (Patriot Home Mortgage) almost 5 years ago

Bridget - I've been reading way too much about all this. Some of it deals with changes in effect today - and then there's the "final rule" that goes into effect on August 1, 2015.

Meanwhile, the rules for Qualified Mortgages are full of exceptions - what is the debt to income ratio allowed for GSE loans? It doesn't say. So what are those regulations?

I applaud lenders who can get all this straight and keep up with the changes.

Posted by Marte Cliff, Your real estate writer (Marte Cliff Copywriting) almost 5 years ago

most of the people do not realize hoe dosruptive Dodd Frank is.... lot of it is ggod and all of it well intentiuoned. Howver tghe government fox to an issue is rarely the best fix!!

Posted by Paddy Deighan JD PhD, Paddy Deighan J.D. Ph.D (TimeshareLawyers.pro) almost 5 years ago

Bridget

thank you for spelling out things so those of us who do not keep up with things like this have the truth.

Posted by Dan Dee McGinnis The Pumpkin Man (eXp Realty) almost 5 years ago

Bill, It's all in the spin.  I just tell folks "Settle Down Francis It's All Going to Be Fine!"

Jordan, Buyers need to consider what else they want to spend money on besides the roof over their head.  A good lender should help folks to understand the true cost and help them to determine what makes sense for them.

Praful, Thanks for the suggest...you have some pull!  :)  In 2011 there was over a change a day to Mortgage Law and Regulation, I would imagine that is probably a statistic that will be sustained!  Cha Cha Cha Changes...wouldn't it be boring if there was no change?!

John, trying to calm chicken little!  The sky is NOT falling!

Gene, Sadly it's not just the media...I heard lenders lamenting the "New" rules.  Much Ado About Nothing is right!

Kevin, You are a sharp agent who I am sure partners with strong lenders.  What? They wanted him to prove he could PAY for the loan too?  I bet that will be the NEXT NEW THING!

Debbie, Lots of changes to be sure, but it's what makes life interesting. You don't have to know every change, but you do need to be aware of the things that will affect your clients and your business!

Graziella, My pleasure!

Tina, I think there are a lot of folks with personal accountability (which I read as integrity!)  Unfortunately the regulators are still trying to figure out what went wrong so they can look like they are doing something to fix it!  Most of the fixes are already in place.

Ric,  I agree with you...Reviewing everything up front is the only way to avoid issues in the end...Good on you!

 

Posted by Bridget "Mortgage Mama" McGee, Maryland Mortgage Mama NMLS#196068 (SWBC Mortgage 410-960-2061) almost 5 years ago

Lenn,  There is absolutely more regulation than should be needed.  

You have quite a track record, congratulations!  There have been many times over the years that we have advised folks that the loan they wanted was not right for them.  You may be surprised at how many went elsewhere only to came back 6 months or a year later trying to get out of what some other less knowledgable or concerned lender put them in!

You, my friend, are definitely not a potted plant!  Not all realtors understand the mortgage market, which is why I am honored when they choose me to help their buyers to find the right loan!

 

 

Posted by Bridget "Mortgage Mama" McGee, Maryland Mortgage Mama NMLS#196068 (SWBC Mortgage 410-960-2061) almost 5 years ago

We've been talking about these new rules in our office...will be interesting to watch how they play out during the spring buying season.

Posted by Mary Hutchison, SRES, ABR, Experience Agent in Kansas City Metro area (Better Homes and Gardens Real Estate-Kansas City Homes) almost 5 years ago

Hi Paul, The good ones will not only survive, but thrive AND will be the ones who navigate the changes the best!

Peggy, Thanks

Michael, The funny thing is that it was the regulations that got us in this mess to begin with!

Margaret, If only the banks and the regulators had some!  :)

David, You would think that affordability should have been a no-brainer all along!  I would love to see the statistics on the "overwhelming majority".  The values got so over-inflated in most areas of the country that it didn't even make sense!

Rob,  You are so right!  Great comments!  Thanks.

Juan, A mortgage is a big deal.  There is a lot of documentation required.  It only gets frustrating if the expectations aren't set up front!

Geoff,  There are probably already tons of laws and regulations in place that are redundant.  I just wish that they would really work with the folks in the field, who are doing it every day to get input...at least then the disclosures might actually be easier to understand!

Bryan, "Pulse" loans...if you've got a pulse you get one!  Reminds me of some college fake id's..."I am 21"  You are so right, some are not meant to be homeowners.

Myra,  There were bad loans, there were bad regulations, there were bad lenders and bad borrowers...lots of blame to go around.  Stabilization is a great thing...

Mary Ann, Unfortunately we haven't seen the end of foreclosures or short sales.

Tammy, I would be surprised if it really affected many buyers.

Jason, HA!  The government is involved...expect more hurdles!

Travis,  Lots of documentation...expectations set up front makes it easier to swallow!

Sharon,  There is a frustration level, but if everyone works together and understands that the ones who are asking are only doing their jobs, the loans get done.

Athina, I had one client describe it as being "FINANCIALLY NAKED"...kind of how it feels!

Joe, Lots of blame for those bubbles than just the lenders...too bad the rules are subject to interpretation!

Donna, Hope it helped

Roshan,  Setting expectations is key...all the best in your new home!

 

 

 

 

 

Posted by Bridget "Mortgage Mama" McGee, Maryland Mortgage Mama NMLS#196068 (SWBC Mortgage 410-960-2061) almost 5 years ago

Ed, Thanks and good luck to you both!

Paul, sometimes we have to be like Mahammad Ali!

Marte, GSE's have certain guidelines in effect that take several factors in account.  We have been told that as long as we get a desktop approval or accept, we can approve the loan.  There is no clear cut max, but I have seen loans at 50% plus get approvals in the past...you never know for sure until you run it.  That is why I don't expect most of my realtors to know much about lending...let us work with the buyers based on the current guidelines...don't want to knock someone out of a purchase if they qualify (and it makes sense for them!)

Paddy,  Government fox is as bad as a government fix!  There have been so many regulation changes put in place that are redundant and cumbersome since the meltdown.  It's too bad no one was looking for that fox in the henhouse before the meltdown!

 

Paddy, 

Posted by Bridget "Mortgage Mama" McGee, Maryland Mortgage Mama NMLS#196068 (SWBC Mortgage 410-960-2061) almost 5 years ago

Mary,  Spring seems to have sprung early in Maryland.  It's cold outside but the buyers are out in force!

Posted by Bridget McGee almost 5 years ago

You have presented really well, the changes that came into effect today!  If these changes help prevent folks from purchashing homes, they ultimately won't be able to keep, then so be it.  I'm first in line when it comes to not wishing to repeat this last housing crisis.

Posted by Myrl Jeffcoat, Greater Sacramento Real Estate Agent (GreatWest Realty) almost 5 years ago

I'll wager someone in this administration will rescind or delay most of the rules and regulations so consumers have the opportunity to secure affordable loans, don't you agree?

Posted by Kimo Jarrett, Pro Lifestyle Solutions (WikiWiki Realty) almost 5 years ago

More rules more regulation to save us from ourselves.  LOL!

 

Posted by Jennifer Green (Keller Williams Realty Phoenix) almost 5 years ago

Just more infomation to impart to our clients to make them know that we actually DO know what we're talking about.  I love the tighter guidelines, truth be told.  Great post, bookmarked for future use!

Posted by Carla Muss-Jacobs, RETIRED (RETIRED / State License is Inactive) almost 5 years ago

A well written post Bridget. I am always a fan of straight talk.

Posted by Ellie McIntire, Luxury service in Howard County & Catonsville (Ellicott City Clarksville Howard County Maryland Real Estate) almost 5 years ago

Hi Bridget,

Thank you for the this post, its a great article and feel its right on with the information. I did not see you address the 3% closing cost cap in this article. North Carolina has a 3% cap going into effect which will almost eliminate companies doing real estate loans less than 75,000.(Due to High Cost Lending Laws), not sure if this is a rule for other states.

I also wanted to comment on the 43% DTI, i have found that most regional and national banks are tightening the DTI guidelines between 40-43%. Non-depository lenders .. like myself, are actually following DU findings with no overlays, so if we get an accept eligible finding at 55% then we are good to go.

As a non-depository lender our credit score criteria is more liberal, i.e. i can go to 530 middle with 10% down, and manual underwrite on FHA.

I know its confusing with so much information out there in the news, unfortunately the news only seems to cover generic lending news that the big banks feed to them, which does not give an accurate snapshot of all the lending available to consumers.

Posted by Todd Gurley, Licensed Professional// Mortgage Loan Consultant (TurnKey Mortgage Services, Inc) almost 5 years ago

GREAT ARTICLE! I TRIED TO READ THE 24-PAGE DOCUMENT AND IT WAS DAUNTING -- YOU MADE THIS SUCCINCT UNDERSTANDABLE!

Posted by Karen (KT) Thomas, "KT" (Village Settlements, Inc.) almost 5 years ago

Government just maing life hardder for all of uss, epcially th marginal people. Governmeent has succh cccontrol issues and cannot seem to get enough power

Posted by Jimmy Faulkner, The Best Of St. Augustine (Florida. Homes Realty & Mortgage) almost 5 years ago

Every time the real estate market starts to recover, BOOM! Down comes the government hammer.

Posted by Marnie Matarese, Showing you the best of Sarasota! (DWELL REAL ESTATE) almost 5 years ago

Funny thing is that the newsbytes coming out of NAR and CA Assoc of Realtors is that "mortgage credit is easying".  Really??? On which planet?

Posted by Sylvia Jonathan, Broker Associate, SFR (Coldwell Banker Platinum Properties) almost 5 years ago

There is still a lot of confusion going on over the 43% maximum DTI.  Most don't realize the agencies are exempt from that rule for awhile still.  I think that we will see banks reduce the max DTI on agency loans though

Posted by Rodney Mason, FHA 203(k) & HomeStyle Renovation-AL,FL,GA, SC, TN (On Q Financial) almost 5 years ago

Thank you for this clarification.  Good information about 43% DTI!

Posted by Jan Green, HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN (Value Added Service, 602-620-2699) almost 5 years ago

It may sound crazy but I actually am glad these rules are in place. I hate helping someone find and purchase their new home and down the road see they are struggling and going into foreclosure. That is sad.

Posted by Martha Brown, Your Homes Around Annapolis Agent (Long & Foster Real Estate, Inc., Annapolis MD 21403) almost 5 years ago

Making a loan is – by definition – taking a risk that the borrower will be able to pay back the loan including interest. RISK! That is something that the government is trying to remove from the lending business. Since the government agencies end up owning most of the mortgages, it is they that can set the lending rules…for their own protection. If private lenders had a larger share of the market, you would see more flexible loan terms…but, most likely, at higher rates of interest. You can’t have your cake and eat it too.

 

Posted by John Juarez, ePRO, SRES, GRI, PMN (The Medford Real Estate Team) almost 5 years ago

Thanks for the great info!

 

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., GRI, CDPE) almost 5 years ago

Participate