Latest Mortgage Lending Rules for Arkansas
On Jan. 10, the Consumer Financial Protection Bureau will implement a new set of rules designed to address irresponsible and predatory lending practices that spurred a wave of foreclosures the past five years.
The new “Ability-to-Repay Regulations” are meant to prevent mortgage lenders from approving mortgages for home borrowers who have questionable credit scores and/or poor debt-to-income ratios. The new guidelines are supposed to better assess these issues and the realistic payment structures necessary for home buyers. If the home buyer cannot afford the loan they are applying for, then mortgage lenders are now required to react in a responsible manner by showing the mortgage borrower different, more feasible options for their situation. Some of these options would be to direct the borrower into an adjustable-rate home loan or perhaps an interest-only loans that require little or no money down.
Is there any good news for potential Home Buyers?
Yes. There is good news for Arkansas homes buyers in 2014! One part of the new set of rules is that there will now be a new cap on the loan origination fees. Up until now, loan origination fees were not capped. However, after January 10, loan origination fees cannot be any more than 3 percent of the amount for mortgages of $100,000 and up.
However, watch out for mortgage lenders such as Fannie Mae and Freddie Mac increasing their guarantee fees. How much you ask? A lot. Home borrowers seeking conventional mortgages may find that lenders are indirectly passing the cost of paying the guarantee fees off on to the home loan borrower. This part is no big shocker, this happens all the time. But the increasing amount of these guarantee fee’s is what you need to watch for.
What You Need To Know:
Here are the highlights regarding the new Ability To Repay Guidelines:
- The Government is attempting to create a new standard for what a “Qualified Mortgage” is
- Risky mortgages are out the window; Negative-amortization, interest-only or balloon-payment loans are now considered outside of what is acceptable for the new “qualified-mortgage standard”.
- Mortgage lenders will be required to thoroughly verify potential home buyer’s income, assets and obligations. If they do not, they risk a lawsuit from borrowers who default on their mortgages. Period.
- New guideline requires a home loan borrowers’ debt to make up 43 percent or less of their gross income.
- FHA Loan amounts are set to change. Anything over $625,500 will now be considered a “Jumbo Loan” and will not qualify for a FHA loan. Also, instead of the typical 3.5% down payment, the down payment for a jumbo loan will be at least 20% of the loan amount down.
- Watch for rising guarantee fees imposed by conventional lenders, Fannie Mae and Freddie Mac.
I hope that this week is going well for everyone and that this news of mortgage lending changes finds you in a good light. If there is anything that I can clarify for you, please don’t hesitate to contact me with your questions.
If you are planning to buy a home in Northwest Arkansas, please don’t let these new regulations steal the joy of buying your new home. Shoot me an email with any concerns or questions and we can get you on the right, informed, knowledgeable path to becoming a homeowner.
Have a great week Arkansas!
Phone: 479-298-3224 | Cell: 479-685-3363