ALL ABOUT THE NEW MORTGAGE RULES

As not many home buyers may know, the Consumer Finance Protection Bureau (CFPB), introduced new mortgage rules that began in mid January, 2014. The rules do make it difficult, or let's say even more difficult than recent years, to get financing on a new home.  Of course it seems unfair to make an already stringent process even worse but it really is all for good cause.  Like our parents used to say, "You may not understand now, but when you're older, you will realize that we do this because we love you."
I can't in all honesty go as far as to say that the cfpb instituted these regulations for those reasons, but they do care and hopefully what they're doing will have positive long term affects.

If you know much about the mortgage game at all, you know that it's been very challenging to get a mortgage since the bubble burst in the mid 2000's.  Any deposit $500 needs a paper trail, debt to income ratio could not exceed 43% (there are extenuating circumstances of course) and good documentation of income among other things, were and are scrutinized under the microscope.  The new rules are basically tightening the belt and enforcing the best practices that were already in place along with the addition of some new protections.
I have briefly outlined them below:

1) NO SURPRISES

• Ability to repay- mortgage lenders are now required to qualify borrowers ability to repay for many years as opposed to the first few months of a mortgage with lower introductory rates that don't provide and accurate analysis of a borrowers ability to pay.  Now lenders must consider more variables and factors- borrower's ability to repay including income,assets, debts and credit history.
• New class of mortgage products, Qualified Mortgages (QM)-  the cfpb instituted new rules for this new type of QM:  1) Borrower must be able to repay: 43% debt to income, now more strict. 2) The mortgage must be safer and easier to understand and cannot contain any detrimental features like interest only plans and negative amortization. 3) QM, a fair deal-  This means caps on points and fees lenders can charge to consumers.  A mortgage $100K or over cannot be a QM unless the points and fees are 3% or less of the loan amount.  

2) AIRBAG

• "Steering" as it's known in the mortgage business is not allowed- anyone who is paid to offer or assist a consumer in finding a loan product cannot receive more compensation by directing consumers to more costly loan products.  No double dipping!  If you pay someone directly for assistance in a mortgage, they generally, are not allowed to be compensated by another party for the same thing. 

3) THE TOURIST

• Qualified Mortgages will be easy to find.  
• Certain loan products, especially existing government programs will automatically fall into this category. 
• The cfpb doesn't necessarily ban certain non-conforming loan products that may help borrower's who are otherwise qualified but are having trouble documenting certain things like income from self employed borrowers. 

4) FITTER HAPPIER

• clearer monthly statements
• early notifications of adjustable rate increases.
• same day credit for payments
• fix errors promptly

5) PARANOID ANDROID

• borrowers who fall behind, now have more options and control.
• lenders must call borrower to collect no later than 36 days after non payment
• lenders cannot initiate foreclosure proceedings until 120 days after non payment.
• no more dual tracking, if a borrower applied to lender for help with the debt, the lender cannot begin harmful foreclosure proceedings while trying to work it out with the borrower.
• customer service reps in call centers must have the right answers to borrower's questions and have access to crucial documents.
• Servicers will have to provide borrowers with accurate information about the status of a foreclosure as long as the borrower requests the status in a timely manner.  
• Lenders must let borrowers who fall behind know ALL of the options available to them when requesting assistance.  This will help eliminate the need for borrowers to submit multiple applications for different assistance programs.  
• If the servicer denies a loss mitigation application from a buyer who submitted it in time, they must provide an accurate reason for denial.  Borrowers will also have the opportunity to appeal the decision. 

6) KARMA POLICE

• the cfpb will stand behind borrowers and homeowners to ensure they are treated properly by lenders.
• the cfpb will also accept complaints about lenders who mistreat borrowers or are not abiding by the rules. 
• though the cfpb does not counsel homeowners who are in trouble, they will point you in the right direction for help and hope.

I think that this is great for borrowers, if they don't qualify, there are things that they can do and lenders will be able to work with borrowers to figure out an action plan.  In my opinion, though quality and condition of the property are of utmost importance, they need to relax a little bit on the Q&C standards that are providing for the ever changing definition of the phrase "move in ready".  I understand some of it but other aspects are just silly.  They require heating in a home but no cooling....ummmmm..we kind of live in Florida and it's swampy out there.  I would also understand if an elevated home had flooring removed and it was just a plywood subfloor, they say you can't move in without some kind of floor covering.  What about homes with a concrete foundation in which a seller or foreclosing bank removed smelly/soiled carpets prior to sale?  Not move in ready!? Unfortunately, no.  This is ridiculous.  Apparently, a fair amount of underwriters will accepta coat of paint on a bare concrete floor as a "floor covering" but won't finance it otherwise?  Silly.  They need to ease up on some of these issues.  Agree?