What the Pros Know: According to Brandon
How the Dodd-Frank Act Could Be Affecting Your Mortgage
Staying up-to-date on changing rules could protect you and your money!
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, I will discuss some of the changes to the mortgage industry that are a result of the Dodd-Frank Act and the questions consumers are asking.
What is Qualified Mortgage Rule?
In January of 2014 the mortgage industry in the United States changed the qualification and requirements in an attempt to minimize the high-risk loans that became 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 in which the loan balance grows over time. Some of the other risky loans it limits are balloon loans and interest-only loans. 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 Consumer Financial Protection Bureau amended Regulation 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 are:
– 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 Consumer Financial Protection Bureau?
The CFPB was established by Congress in January of 2012 as part of the Dodd-Frank Act. The purpose is to protect consumers by carrying out federal consumer financial laws. In January of 2014, the CFPB set new rules for mortgage servicers, which is the company that collects for mortgage payments. Below are the servicing rules:
– All billing information must be in writing.
– At least a two-month warning is warranted if a change in your adjustable rate mortgage interest rate means that your payments are about to change.
– The servicers must promptly credit your payments.
– They must respond quickly when you ask about paying off your loan.
– There will be no charge for insurance you don’t need, and they cannot overcharge you for force-placed insurance.
– The servicers must quickly resolve complaints and share information.
– Quality customer service policies and procedures must be in place and be followed.
– They must contact you to help when you’re having trouble making your payments.
– If you are having trouble paying your mortgage, they are required to work with you before starting or continuing foreclosure.
– They must allow you to seek review of the mortgage servicer’s decision about your loan workout request.