Significant mortgage changes for 2013 and 2014

Mortgage and Lending with Mutual of Omaha NMLS#: 274064

FHA MIP fees went permanent.  MIP stands for Mortgage Insurance Premium.  Over the last few years, the Federal Housing Administration has been looking for ways to trim their losses, so in typical government fashion, they looked to the people to fund their misfortunes.  In this case, they decided to never let homeowners off the hook from paying their monthly mortgage insurance fees.  What used to be removed from the loan payment when the equity in a home reached 20%, now stays on the loan for as long as that loan is in place.  The only way to get rid of it is to refinance to a conventional loan.  One of the unintended consequences of this change is now the only homebuyers who go with an FHA loan are those who have very little down payment or lower credit scores.  Thank you Uncle Sam for using our tax dollars to insure only the higher risk loans and none of the good ones… 

QM – ATR.  These terms have been bouncing around the news lately.  They stand for “Qualified Mortgage” and “Ability to Repay”.  The genesis of each of these terms is in the Dodd Frank Wall Street Reform and Consumer Protection Act passed in January 2010.  This is the 848 page knee-jerk reaction that congress imposed on the nation after the 2007 mortgage melt down.  The debate on how to define these terms is still raging on and we are just a week away from its implementation.  What we do know is that the debt ratio and down payment requirements will be tightened up.  This will make it a little more difficult for a segment of the population to buy homes and put a damper on the housing recovery.  Mortgage companies will also have to go the extra mile in documenting the borrower’s ability to repay the loan.  Banks and mortgage companies who comply with these new restrictions will still have the privilege of selling loans to Fannie Mae and Freddie Mac.  If they don’t, they will get stuck with the loan, or worse, get sued by the borrower for being irresponsible and reckless in their lending practices by giving loans to unqualified individuals.  Yes, a borrower will be able to sue a bank for giving them a loan they can’t afford.       


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