With 2014 came a whole new list of regulatory and legal changes for mortgage companies. These rules and regulations where established with the intention to help both lenders and borrowers from making bad decisions when it comes to home mortgages. Here are a list of regulations that began in January that will affect the mortgage process for potential home buyers according to the Assoc of Mortgage professionals.
New Mortgage Regulations
* Stricter Regulations for the Self-Employed. People that don’t have an IRS form w-2 will be finding it more difficult when applying for a loan. It’s a much greater task for individuals to prove their debt to income ratio without documentation even if their net worth is high with a perfect credit to go along with it.
* A Decreased FHA Loan Limit. The Federal Housing Authority has announced that as of the beginning of 2014 that mortgages shall not exceed the amount of $625,000.00 which is down from the previous amount of $729,750.00. For people wanting to apply for a larger loan would have to apply for a “Jumbo Loan”, which will probably involve a much higher down payment.
* A Cap on Loan origination Fees. As of January 2014 points and fees for a new mortgage cannot exceed 3%of the total loan.
* The Ability to Repay Mandate. This regulation was set in place by the (CFPB) Consumer Financial Protection Bureau. It’s purpose is to set a standard for lending to make sure that each borrower is a truly qualified borrower. Lenders will now have to follow a set of rules in order to establish a consumers income, assets and current obligations before approving them. This is what the government considers a “Qualified Mortgage”.
As a realtor in Orlando, I think it’s a great idea that these new rules are now in place. It helps to protect potential home buyers from getting in over their heads and in the long run it should decrease the amount of future home owners from falling into default with their lenders. These are signs that the mortgage industry has learned a lesson from the real estate crash of 2007.