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Big Changes Due For Mortgage Applications in 2014

872359968_d909047e16_mStarting in 2014, regulations drafted by the Consumer Financial Protection Bureau will change the definition of a qualified mortgage with respect to several of the government agencies that buy most loans from lenders. As a result, many buyers may find themselves unable to meet the new requirements. As of January 10, Fannie Mae and Freddie Mac will not buy non-qualified mortgages. Therefore banks and other lending originators that count on those two government agencies to buy the loans they write will cease to finance clients requiring those types of loans.
A qualified mortgage is defined as one in which the APR is within 150 basis points (1.5 percentage points) of the annual prime offer rate, a loan term cannot exceed 30 years, points and fees cannot exceed 3 percent of the loan balance and there can be no negative amortization or interest-only payments. Under these conditions, the mortgage qualifies for safe harbor, meaning the lender is not at risk of being sued by a borrower who is unable to repay the loan.
There’s also a class of loans called higher-priced qualified mortgages, in which the APR exceeds the 150 basis-point limit, and in those cases, the loan falls under rebuttable presumption, meaning the lender is assumed to have complied with ability-to-pay requirements, unless a borrower or attorney argues otherwise. Loans with rebuttable presumption will likely come at an additional premium, said Cameron Findlay, chief economist at Discover Home Loans, though the price of that premium is unclear at this point.

 

Mortgage Rates Are Lowest In 60 Years

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In what can only be described as a continuous decline, mortgage rates have reached the lowest point in 60 years, dropping to a record of 3.49% for a fixed rate product.
The real problem now, is not how small your monthly mortgage payment will be these days, but what it actually takes to qualify for one of these rates to begin with. Typically, lenders will require a truly blemish free credit history, FICO scores well over 700, significant cash reserves and a perfect appraisal on any property you are considering buying.
While some would laud the banks for tightening the very same mortgage guidelines that helped to cause the housing crisis in the first place, financial institutions also seem to be understandably concerned about the future profitability of themselves and whomever they are selling their mortgages to. Who wouldn’t want to limit the pool of borrowers by any means possible, to as few people as possible, when the prospect of loaning money out, over 15 – 30 years, becomes a losing proposition once bank savings rates go above 3.49%. Some of us are old enough to remember when a passbook savings rate was over 6%. Common sense would say that this will happen again, sometime in the next 15 – 30 years. What bank or investor wants to be stuck with a borrower paying only 3.49% then? Read more at:
http://www.usatoday.com/money/economy/housing/story/2012-07-26/home-sales-mortgages/56499092/1

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