How will QM/ATR affect your business? (Part 1)
Last week we sent you a link of the 22 minute video produced by the Consumber Financial Protection Bureau, to give you some backdrop about what QM and ATR were. This week let's dig a bit deeper in how it will affect your business.
Ability to Repay really not a big deal
The Ability-to-Repay rule sounds like a bit of common sense, after all who wants to lend money to anyone that can't pay it back? However it was created to combat the loose credit standards that were introduced during the 2004, 2005 era - the NINA, NINANE, the SIVA, SISA, and the Santa Maria (ok, I made up the last one. The others were loan programs that were No Income, No Asset, No Employment or Stated Income, Stated Asset programs). You won't see much of a difference when it is enacted because lenders have long since tightened up credit guidelines back to a standard "full doc" world. Under the ATR lenders have to check documentation like W-2s and pay stubs, and consider eight types of information:
1. Your current income or assets
2. Your current employment status
3. Your credit history
4. The monthly payment for the mortgage
5. Your monthly payments on other mortgage loans you get at the same time
6. Your monthly payments for other mortgage-related expenses (such as property taxes)
7. Your other debts
8. Your monthly debt payments, including the mortgage, compared to your monthly
income (“debt-to-income ratio”). The lender may also look at how much money you have
left over each month after paying your debts.
The lending industry has already tightened the requirements, so you won't see much (if any) difference here.
If you would like to do a bit more reading on the subject, the CFPB put out a consumer guide called "What the new Ability-to-Repay rule means for consumers". You can read it as well as download it here:
(if the link doesn't work, type this address into your web browser: http://goo.gl/10FFQM)
Next week we'll dig deeper into the Qualified Mortgages piece. Be sure to look for it!
Last Week's Mortgage Rate Recap
Mortgage Rates Currently Trending: HIGHER
Last week saw rates deteriorate an average of .125%, depending on the lender, as we saw MBS (Mortgage Backed Securities) pricing deteriorate and test the support level of 102.00 after the announcement from the Fed meeting and the much higher than anticipated Chicago PMI number. The economic data and announcement concerned the markets that the Fed might not wait until next March to begin the tapering of the markets that we have been so concerned about the last month. This news was bad for bonds and led to a Friday selloff that tested the support level at 102.00 which appears to have held up.
This Week's Mortgage Rate Forecast
Mortgage Rates Forecast: NEUTRAL, but high threat of volatility
This week we will be dealing with the October employment data being released on Friday, which will be the focus for the week. On Thursday the third quarter GDP numbers will be released, and depending on if we meet market expectations or fall below could lead to either an MBS rally or a sell off. If we continue to trade within the current channel, that bodes well for rates. However if we sell off and pierce the support level at 102.00, be ready to see rates jump.
BOTTOM LINE: There is risk to floating right now, but also potential reward. The best course of action is to stay in contact with your Mortgage Loan Professional to watch the market in real time to stay a step ahead of lender reprices and market trends to protect your mortgage rate.
RateAlert’s Most Trusted Mortgage Lending Professionals:
Loan Professions that subscribe to RateAlert Executive services have the training and market knowledge at their fingertips, along with live trading data during market hours to expertly help navigate the difficult and often times confusing process of understanding rate movements and which factors may cause volatility when considering whether or not to lock. If you’d like to learn more about what things to consider when timing the market in an effort to obtain the best interest rates, don’t hesitate to contact the person who sent you this commentary.
This commentary has been sent to you by the Mortgage Loan Originator (MLO) above because they thought you may find it interesting or helpful. The views and opinions offered do not necessarily represent the views of your MLO. Please contact them with any questions or to find out more about the information listed herein and how to work with them.