ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL- 01/17/2013

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL - 01/17/2013

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Though the new "ability to pay" (aka Qualified Mortgage or QM) rules released last week by the Consumer Financial Protection Bureau drew extensive media coverage, there are still widespread misunderstandings about how they'll work in practice.

Plus the Dodd-Frank law limits total points and fees for qualified mortgages at 3 percent of the loan amount, including fees paid both by the borrower and lenders to loan officers.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL

That could negatively impact large lenders, home builders and realty brokerages who use affiliated companies for certain loan-related services -- title, settlement, appraisal among others. Now, they'll somehow have to cram originator/ broker compensation and the affiliates' fees into deals to pass the 3 percent test -- if they can.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL

But the Dodd-Frank law, and the new rules, prohibit interest-only features in loans that get the QM stamp of approval. Since the jumbo market lacks the strong secondary market support of Fannie, Freddie and Ginnie Mae, lenders are expected to avoid all non-QM loans.

Since FHA and VA loans frequently have back-end DTIs above 43 percent, this will keep the door open to some, but not all, borrowers who need special considerations on credit defects and other issues in their applications.

However, since automated underwriting approval will be required, manual underwriting may no longer get them in the door.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL

•Seller-financed notes and mortgages, which can provide creative solutions to a wide variety of buyer incapacities, will not be affected by the federal QM regulations at all.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL

There will be no restrictions on the terms, rates or payment features that home sellers can offer purchasers who might not be a candidate for a bank loan.

However, sellers who make more than five such notes during the course of a year will not qualify for this exemption.

ACTIVE REAL ESTATE FORECLOSURES FOR SALE IN MOBILE AL

•Subprime loans in the QM era? Not a chance from major financial institutions. Those folks will either have to find a way to qualify under FHA's rules -- which may be increasingly unlikely since FHA is toughening, not relaxing, credit standards and raising fees -- or just not become home buyers at all.