Learn about recent changes in the mortgage industry and how they affect you and your home.
We seem to hear a lot in the media about securing mortgage approval and the difficulties plaguing mortgage consumers. What are these changes they are talking about? Below we will discuss some of the changes to the mortgage industry are a result of the Dodd-Frank Act and the questions consumers are asking.
What is Qualified Mortgage Rule?
On Jan. 10, 2014 the mortgage industry in the United States changed the qualification and requirements in an attempt to minimize the highrisk loans that became very common in the housing boom. These new regulations were designed to protect the consumer. One of the loans that Qualified Mortgage prohibits is the “negative amortization” option where the loan balance grows over time. Some of the other risky loans it limits are balloon loans and interest only. Lenders are still able to make mortgage loans; the main change the consumer will notice is that the documentation guidelines are a little stricter for all loan purposes.
What is ATR?
ATR stands for ability to repay. These new rules are set up in an effort to protect the consumer. The cfpb amended Regulations Z to prohibit a lender from making a higher-priced mortgage loan without consideration of the consumer’s ability to repay.
You as the consumer will be asked to provide reliable documentation to determine eligibility. The typical information lenders consider includes:
• Current income and assets
• Credit history
• Monthly mortgage payment
• Monthly mortgage-related expenses (property tax, insurance, homeowner association dues)
• Other debts
• Monthly debt payments compared to your monthly income
• Residual income
What is the cfpb?
Cfpb is Consumer Financial Protection Bureau. The cfpb was established in January of 2012 as a part of the Dodd-Frank Act. Cfpb was established by Congress to protect consumers by carrying out federal consumer financial laws. In January 2014 the cfpb set new rules for mortgage servicers, the company that collects for mortgage payments. Below are the servicing rules (taken from files.consumerfinance.gov/f/201301_cfpb_mortgage-servicing-rules_what-it-meansfor-consumers.pdf):
1. Give you billing information in writing;
2. Give you at least two months’ warning if a change in your adjustable rate mortgage interest rate means that your payments are about to change;
3. Promptly credit your payments;
4. Respond quickly when you ask about paying off your loan;
5. Not charge you for insurance you don’t need or overcharge you for force-placed insurance;
6. Quickly resolve complaints and share information;
7. Have and follow good customer service policies and procedures;
8. Contact you to help when you’re having trouble making your payments;
9. Work with you, if you are having trouble paying your mortgage, before starting or continuing foreclosure;
10. Allow you to seek review of the mortgage servicer’s decision about your loan workout request.
Leighanne is a vice president of real estate lending at Landmark Bank with more than seven years of experience helping all kinds of buyers and homeowners with real estate financing. She has both her MBA and undergraduate degree in business management from William Woods University. Call her at 573-499-7307, or email her at [email protected]. Landmark Bank is an Equal Housing Lender and a Member FDIC.