We’ve been keeping an eye on and trying to craft the information into digestible blog posts that cover what, exactly, is in store for the mortgage industry. Jay Kalinski and Trevor Bellows have submitted their input, so here’s another opinion from Don Frommeyer, CRMS, President of NAMB (The Association of Mortgage Professionals).
2014 mortgage industry changes are set to include
Decrease in FHA Loan Limit: As Jay Kalinski covered earlier this month, the Federal Housing Administration (FHA) announced that starting the first of the year, mortgages will be limited to $625,000—as opposed to the previous $729,750 limit. Homebuyers looking to obtain a larger loan will have to apply for a jumbo loan, which will most likely require a higher down payment. “For many areas of the country this change won’t be a huge issue as average home prices fall below the established limit. However, borrowers in metropolitan areas with higher average housing prices may face challenges when applying for mortgages as the 20 percent down payment associated with jumbo loans will be an enormous increase from a traditional loan’s 3.5 percent down payment,” notes Frommeyer.
Tighter Regulations for Self-Employed: As the rules to create a QM (qualified-mortgage) take effect, people without a W-2 will face difficulty when they apply for loans. It’s more of a task for individuals to prove their debt-to-income ratio without the proper documentation, despite high net-worth and perfect credit.
Ability-to-Repay Mandate: The CFPB designed this regulation to set a gold-standard for lending to ensure every borrower is a qualified borrower. Lenders will follow a set of guidelines to establish a consumer’s income, assets and obligations before deeming them eligible. The CFPB rules establish a standard for what the government considers a “qualified mortgage.
Caps on Loan Origination Fees: Starting January 10, 2014, fees on mortgages cannot exceed 3 percent.