Are You Aware of the New Lending Laws Changing in April 2012? Do you know what will be required to obtain a Qualified Residential Mortgage?
I was minding my own business this morning getting ready for work and listening to the news, but stopped in my tracks when the TV host said, "and lenders will require a minimum of 20% down on home mortgages..."
The speaker went on to explain that as of April 2012 new lending laws will establish a QRM or Qualified Residential Mortgage. These new rules include:
- minimum of 20% downpayment
- minimum equity of 25% to qualify for refinancing
- minimum equity of 30% to qualify to pull cash out of your real estate
- minimum credit score of 740
There is a lot to this bill (233 pages to read at your leisure). Some of it makes good sense (ratios will be limited to 28/36; no negative amortization, no bankruptcies for 3 years, adjustable mortgage caps of 2%/6%, and more). Other aspects are highly restrictive (no 30 day lates, no 60-day lates for 2 years, 50% of downpayment must be buyer's own funds, high equity positions and high credit standards, and more).
At this time, the plan is that the new QRM rules will not apply to FHA loans - preserving a resource for less than 20% down real estate purchases. If a lender tries to skirt the QRM rules, they will be required to hold part of the mortgage in-house. Only those loans that conform to all the rules will be able to be sold on the secondary market.
This is all part of the Dodd-Frank Act, and it isn't fully in place yet. There is still time to do something about a set of rule changes that will dramatically effect the real estate market. For more information on this proposed bill: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110329a1.pdf
This bill makes me visualize a pendulum - first it swung liberally all the way to disaster, and now it could swing conservatively all the way to a double dip in the real estate market! Whatever happened to the Happy Medium!?