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#429915 - 11/02/13 06:42 PM Agents........are you ready for January 2014?
SmartMoney Offline

Registered: 08/13/05
Posts: 102
Loc: No. VA
Or, are you going to get caught in the headlights?

There are some mighty big changes coming to the lending world and two phrases are sending chills down your lenders' backs:

QM (Qualified Mortgage) & ATR (Ability to Repay)

Bottom-line: bye-bye to IO loans, > 30 year loans, neg-am loans, balloon notes, prepayment penalties, any loan costing > 3%, and loans over 43% (this is for conventional, VA, FHA).

Why the hard line on ratios (on guidelines that have already tightened way down)? If a lender approves and closes a loan with any of these features and those borrowers later default, those borrowers have grounds (with government support)to sue the lender for providing a loan they never should have been given. Think about that for a minute. You have a customer that is at a 42.3% ratio, and the overtime on the borrower's paystub was calculated based on a 24 month average. But due to the UW leaving off the YTD months, the file should have used YTD and a 32 month average (raising the ratio to over 43%), you now have a loan in direct violation of these rules. If buyer defaults, he can sue and maybe keep the house. Underwriting has become a challenge, with perfection demanded in every file. What kind of rock turning do you think you will see in underwriting?

No one wants to come waltzing in to a real estate office and tell agents that their far and few buyers may not make it if they don't close this year. But I urge everyone to Google these phrases or at the very least, ask their lender the next time they see them.

#431397 - 01/02/14 08:51 AM Re: Agents........are you ready for January 2014? [Re: SmartMoney]
Nashville Homes Offline

Registered: 07/25/13
Posts: 113
Loc: Nashville, TN
Thanks for posting this! Would you be able to cite the source of some of your info (preferrably a web page!)? I try to write about mortgage-related issues in my real estate blog, but I'll admit, I don't follow the news as well as I should!

#431400 - 01/02/14 10:48 AM Re: Agents........are you ready for January 2014? [Re: SmartMoney]
KyleH Offline
Junior Member

Registered: 01/01/14
Posts: 9
Loc: Texas
Thanks for this. I've heard about the QM. I didn't really put an example to it like you did. When you put it like that, it really does sink in about what we are in store for.


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