NEW 2014 MORTGAGE CHANGES

The deadline for much needed updates to the mortgage lending industry was January 10, 2014. With the new 2014 mortgage changes, the industry is essentially returning to traditional loan standards that include requiring extensive documentation of income and assets for loan approval.

Here are some of the major changes to the mortgage lending process required by the Consumer Financial Protection Bureau in order to meet the goals set forth by the Dodd-Frank Act in Congress.

 2014 Mortgage Changes – New Loans

1. The “ability-to-repay” feature of the Qualified Mortgage (QM) rules requires all borrowers to prove they have the cash flow to make monthly mortgage payments. Self-employed borrowers must prove their income with tax returns and profit-and-loss statements. Traditionally employed borrowers will continue to provide tax returns, W-2 forms and pay stubs.
2. According to the “ability-to-repay” rule, borrowers cannot exceed a 43% debt to income ratio – total monthly debt divided by total monthly income before taxes.
3. Fannie Mae and Freddie Mac loan limits are $417,000 in most housing markets and $625,000 in high-cost areas. The Federal Housing Finance Agency is expected to reduce these loan amounts later in 2014.
4. The standard down payment for Federal Housing Authority (FHA) loans under $625,000 remains at 3.5%. However, the down payment requirement for jumbo loans (a loan over $625,000) has increased to 20% of the overall purchase price.

2014 Mortgage Changes – For Lenders

1. Mortgage lenders must indicate the portion of monthly payments that went to escrow and principal (if any) on monthly billing statements.
2. Lenders must credit monthly and additional payments to your account on the day funds are received. In addition, lenders must respond to your loan payoff inquires within seven days of receiving correspondence.
3. Lenders must acknowledge any correspondence you send with a question or concern within five days of receipt. The lender then has 45 days to answer your question or address your concern and inform you of the outcome.
4. Lenders must inform adjustable rate mortgage (ARM) holders of interest rate increases by mail no fewer than four times – 240, 210, 120 and 60 days prior to the first payment at the new rate.
5. Within 36 days of a missed payment, lenders are required to make an attempt to contact the homeowner. Available options to rectify the loan must be presented no later than 45 days after the missed due date.
6. A lender can pursue foreclosure if a homeowner fails to apply for potential loan rectification options and payments have been late for over 120 days.

If you have questions about the new 2014 mortgage changes and how they might affect you, contact us. Selling Fort Lauderdale Luxury Homes is only part of the long list of services we offer clients.

SOURCE: Consumer Financial Protection Bureau