Pink House Team
On January 10, 2014 numerous new lending laws will go into effect. Some of them stem from the Frank-Dodd Act and some came from the Consumer Financial Protection Bureau and some of them are a combination of both.
I am not an expert on this nor am I sure I have any idea what I am talking about. Oh, wait. Neither does anyone else. What I might have to say here on the subject will definitely conflict with what others say and some of it will align with other articles. The only thing that we can all agree on is that after January 10, 2014 there will be a big mess in the mortgage business which will detrimentally affect the real estate industry. Just what we need, now that we are finally on the road to economic recovery.
Apparently the left hand wanted everyone to be in the category of a QRM (Qualified Residential Mortgage) and the right hand wanted everyone to be a QM (Qualified Mortgage). They seem to have collided and ended up with a combination but kept the QM acronym. It was shorter I guess.
What is a QM? It seems like the two most important things are that the borrower has to provide proof of income to prove they can afford the mortgage. This is called the "ability-to-repay rule". Hello? And the second thing is that their total DTI (debt to income ratio) can't be above 43%. That is breaking news.
Banks and lenders receive all of their software for mortgage loans and processing from software vendors. The rules go into effect on January 10, 2014 but the vendors have no clue when the software will be ready. (Can you imagine doing this all by hand? Like in the olden days?) Partly because the rules keep getting changed and amended. It will literally costs millions of dollars in software redesign, training, and implementation of this software. Who will pay for it all? Watch out buyers. More fees. This is to protect you, though.
There are reports of all of the disclosures (about 50 to date) that have to be presented to the borrower are being modified, changed and confusified. The fun part about one of these is the 3 day rule. Rumors have it that the lender has to provide all of the paperwork to the title company who in turn puts it all together 3 days before closing. So in effect this is how it will work. All of the paperwork is done and the buyer has the closing statement in their hands. Now we wait. And wait. And wait again. Three days are finally up and we all go to the title company and sign the papers. We all had an extra three days of stress. Thank you very much Mr. Frank/Dodd.
I met with a client today and my recommendation to her was to be sure to get closed before January 10, 2014. You still have time.
Pink House Team
Keller Williams Realty
7304 SW 34th
Amarillo, TX 79121