There will be changes in lending as you know for the 2010 year. I asked my friend Jary Martinson to send me some news that he has found about this lending changes topic. I liked his last few sentences in his email to me, it's all about attitude and how we perceive the changes. We can take them positively or negatively.
Here below is the information about those changes in store for all of us:
2010 is going to give us a fresh start, but it's also going to bring many changes. Here are a few...
- Most conventional loan programs will limit the housing payment to about 33% of the household gross income and a maximum of 45% will be allowed for the house payment plus monthly debts on the credit report. Government loans such as USDA's Rural Development, FHA, and VA loans may go as high as 50%. (even higher in some circumstances)
- The new Good Faith Estimate will now be 3 pages long and not look anything like we're used to. HUD has changed it so that the fees are grouped and added into lump sums under different categories. Some advantages are that on the first page, it will specify how long the estimate is good for, if the program is fixed or adjustable, if there is a prepayment penalty, and all other pertinent loan factors. Seller paid costs will no longer be represented on the good faith estimate so that will have to be deducted from the bottom line on the first page, but will show as a buyer cost. Also, there is a new settlement statement that has the same line numbers as the Good Faith Estimate so that fees can be matched at closing. The whole purpose is to stop the mortgage bait and switch from happening.
- Computer underwriting systems, which used make the decision on the loans, are only going to be used as a tool to determine if a loan should be underwritten. Traditional underwriting by a human being will be the primary way of making the majority of the final decisions on mortgage loans.
- Private mortgage insurance company's, which insure mortgages that are higher than 80% of the value of the property, will limit most borrower's house payment plus monthly debts to 41% of their gross income.
- Minimum credit scores are now 620 for most programs, but we may see that increase up to 640, depending on how the banking world evaluates risk in the new decade.
- HUD is now allowing for a higher than 1% origination fee on FHA loans.
I know that this may sound like all bad news, but its really just news. How we react to it will make it positive or negative. Lending is just going back to where it was in the late 1990's, with a few twists. Structuring a loan properly, complying with the new laws, and knowing and understanding loan guidelines are going to be critical in the coming year for mortgage professionals. As long as we stay positive and educate our selves, we'll all prosper.
Have a safe and happy new year!
Branch Manager, Mortgage Banker
Life Mortgage, a division of Mann Mortgage, LLC
9120 NE Vancouver Mall Loop
Suite #250 (The Timbers)
Vancouver, WA 98662