And it's not entirely a bad thing. While the real estate market has had a boom over the last five years, mortgage lenders have been looking for ways to GIVE away money. "Exotic" loans have become the buzz word in the mortgage industry. These are the interest only kinds of ARMS that lower the monthly payments of the borrower. These loans have made it possible for more people to quality for homes. I'm not a mortgage officer, but here is what I have seen happen. I have been meeting people who have been in there homes for 2-4 years, were unlucky enough to work with a banker who did not explain to them that over time the rates on those loans would go up, and so would the payments. There are people who are now stuck with payments they can't afford. I don't have a crystal ball, and am not a mortgage officer. But if history repeats itself, and it usually does, interest rates will continue to rise-and so will the number of people who can no longer to live in their homes because they didn't either didn't understand that their payments would go up, or they didn't want to. This likely means there will be an increase in foreclosures across Minnesota.
Enter Lori Swanson, Minnesota's new Attorney General. Before she even took office she formed a 12-member study group to work on legislative proposals that will require verification of a borrower having the ability to repay a loan, and more disclosure to consumers to understand the fees involved in closing a loan.
On the Down Side: Any time there are new regulatory requirements, they cost money to implement, and someone has to pay for them. It will be you, the consumer. My favorite example is Nursing Homes. They are the most highly regulated industry right behind the nuclear industry, and the cost is so prohibitive many need Medicare to be able to stay there. In addition, you'll have yet a few more pieces of paper you'll have to sign at closing!
On the Up Side: I'm jumping up and down and singing Lori's praises! As a Realtor I sell houses. This is how I support my family. However, I have seen the devastating effects of predatory lending and what a foreclosure does to a family. As a result, if buying a home means you don't know how you'll be able to pay for your car, buy groceries, or even go to a movie once in a while perhaps it's just not the right time for you to buy a home. As a licensed professional I can show you how waiting can cost you some money, but it also may help you avoid the devastation of losing a home you worked so hard for.
There are going to be people in the real estate industry that will bemoan the new regulations. I welcome them with open arms and applaud Lori Swanson's intention to protect consumer's from predatory lending.