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Home Loan Qualification Is Not What It Was Just 3 Weeks Ago.

By Lenn Harley

Real Estate Agent with Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate 303829;0225082372

January 17, 2014 06:41 AM

Home Loan Qualification Is Not What It Was Just 3 Weeks Ago.

In fact, many factors for home approval are not what they were on January 9th.

Thank You CFPB. I'm still studying the myriad of new guidelines that loan officers must follow to qualify a home buyers for a price range. One thing has changed dramatically for me. Buyers who were pre-qualified for a price range in 2013 may not now be. The new DFPB guidelines actually entered the scene for me with a home buyer in 2012 when more specific documentation was required.

History of the CFPB

In July 2010, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Act created the Consumer Financial Protection Bureau (CFPB). The CFPB consolidates most Federal consumer financial protection authority in one place. The consumer bureau is focused on one goal: watching out for American consumers in the market for consumer financial products and services.

O.K. Back To School For This Broker. Well, at least a period of self-study and, thank goodness, a wonderful group of mortgage loan officers who will answer questions for me if I hit a roadblock. Hasn't happened yet, but . . . . . considering the variety of home buyers who contact me about buying a home in Maryland and Northern Virginia, I must have a working knowledge of how things work so I can refer the inquiring buyers to a loan officer who can help them. These buyers are also going to be referred to a real estate broker in my network to do the hard work of finding them a home. However, it all begins with "what is that buyer qualified to buy", meaning loan programs and price range. I wouldn't waste the time of my valued referral brokers and agents by sending them worthless referrals.

Life Before The CFPB. Ah, I remember it well. Oh sure we had many things that required constant study and awareness. The Maryland and Virginia state bond programs offer opportunities for financing and it's important for me to stay on top of which loan officer not only offers which programs but the quality of service that loan officer offers our home buyers. Then there are the U.S.D.A. financing opportunities available in many areas of my market. U.S.D.A. is redrawing their eligibility maps as we speak and that means more study.

We only accept buyer clients that we are confident we'll be able to help. Not only will we find them a home to buy, we'll also make sure that they can financing it.

This post inspired by Gene Mundt in The "Science" of Pre-Qualifying Home Buyers During the 1st Quarter of 2014

Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, serving home buyers in Maryland and Northern Virginia.

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Kathleen Daniels, Probate & Trust Specialist

KD Realty - 408.972.1822 - San Jose, CA

Probate Real Estate Services

Lenn, We are in an ever-changing industry. Life is like a river, we want movement and change or we become stagnant. The key to these kinds of changes is that we all need to stay on top of them. Many "professionals" falter when they do not keep current. We all know Mrs. Harley will get the information she needs to serve her clients.

Jan 17, 2014 07:09 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Kathleen. Thanks. I sure do try. I have some wonderful loan officers I can rely on.

Jan 17, 2014 07:10 AM

Paul S. Henderson, REALTOR®, CRS

Fathom Realty Washington LLC - Tacoma, WA

South Puget Sound Washington Agent/Broker!

This was one of our top topics in our December sales meeting. I have yet to hear one of my mortgage reps show any alarm. A couple of clients have...

Jan 17, 2014 07:37 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Paul. Same here. They have warned me that the new regs may delay loan approval for a few days or couple of weeks.

I can deal with that.

Jan 17, 2014 07:47 AM

Bill & Cyndi Daves

Hiawassee, Young Harris, Blairsville, Hayesville, Murphy and Beyond! - Hiawassee, GA

TeamDAVES - Your REALTORS In the GA/NC Mountains!

Lenn - We had a mortgage broker speak at our recent meeting. Like most, he said there was no cause for alarm. The guidelines were simply that - guidelines and that loans could still be written. My take-away from reading the document is simply that if a lender elects to loan money to someone that doesn't fit in the guidelines that they can certainly do that. However, it appears they will have to keep that loan "in house" and may not have as much recourse (i.e., right to go after borrowers for dificiencies) if they ever do have to foreclose.

Jan 17, 2014 09:32 AM

Kay Van Kampen

RE/MAX Broker, RE/MAX - Springfield, MO

Realtor®, Springfield Mo Real Estate

We need to have a lender speak at our next meeting. I sat down with one this week and there's so much to learn.

Jan 17, 2014 09:36 AM

John Meussner

Mortgages in AZ, CA, CO, DE, FL, GA, IN, MD, MN, MT, NC, NJ, NV, OK, OR, PA, SC, SD, TN, TX, UT, VA, WI - Fair Oaks, CA

#MortgageMadeEasy Fair Oaks, CA 484-680-4852

You're right, Lenn. Good blog pointing out how drastic these changes have been, and if there's one thing I'm sure of it's that in a few weeks things will be even more different as lenders adapt to the changes and implement new programs to deal with them.

Jan 17, 2014 09:46 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Lenn I love this claim by the CFPB:

"The consumer bureau is focused on one goal: watching out for American consumers in the market for consumer financial products and services."

Strange way of "watching out for American consumers"

Jan 17, 2014 09:52 AM

Hella M. Rothwell, Broker/Realtor®

Carmel by the Sea, CA

Rothwell Realty Inc. CA#01968433 Carmel-by-the-Sea

Lenn: I'll keep checking back with you for more future blogs on this subject. It's one thing to read posts by loan officers explaining the new guidelines, it's another how it impacts us, the real estate brokers. I like to hear how you handle them.

Jan 17, 2014 11:49 AM

Joe Petrowsky

Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT

Your Mortgage Consultant for Life

Good morning Lenn. I have been in the mortgage business since 1979 and have seen a lot of changes over the years, so speaking from experience can tell you, not much has really changed this time. The biggest change that I see is in the area of adjustable rate mortgages, as I now need to qualify the client based on a fully indexed rate.

Make it a great weekend!

Jan 17, 2014 07:15 PM

Ginny Gorman

RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI

Homes for Sale in Southern RI and beyond

Lenn, I so hear you and have already scheduled a great mortgage lender to speak at our next staff meeting...we need to be so informed to the current lending requirements.

Jan 17, 2014 08:48 PM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Bill and Cyndi. That penalty to a loan originator for approving a loan that fails has always been there for Veterans Admin loans.

Can't argue with it.

Kay. Indeed. I learn each time I speak with a loan officer.

Joan. The entire industry is in flux despite denial by some lenders. My solution has simply to pre-qualify home seekers at a lower DTI than before.

George. I couldn't agree more. There is, IMO, nothing that has come out of the Obama admin that is favorable or helpful for consumers.

Hella. As long as there is a breath in me to spread the word.

Joe. Which is, IMO, grossly unfair to VA buyers who have orders for a 3-5 year assignment.

Jan 17, 2014 09:24 PM

Carla Muss-Jacobs, RETIRED

RETIRED / State License is Inactive - Portland, OR

And this is a good reminder for people that have their pre-approval done recently, but prior to Jan 10th. Make sure it's still valid.

Jan 18, 2014 03:07 AM

Wayne L. Brown

Franklin Advantage Inc. - Alpine, CA

Lenn

I agree for the most part with Joe Petrowsky. Most of what has come down are things that lenders have been doing for years. While there are just a few exceptions.

Unless I am reading and hearing incorrectly from all of our company meetings on this, mainly we have to ensure that debt ratios do not exceed 43%. However, from what I am being told, we can exceed those with DU or LP approval.

Additionally, it means that lenders must document that they have followed the Ability to Repay Rules (ATR) which add extra layers of compliance reviews to the process.

Where there is still some confusion is in the area of the 3% Fee Cap on lender income. For example, while FHA and VA are exempt of the MIP and Funding Fee in this calculation, Borrower Paid PMI is now included in this amount of the calculation. Lenders can avoid this by doing only borrower paid monthly MI or Lender Paid MI. Lastly, any lender admin fees and processing fees are included in this from both a Broker or the direct lender

That said, one new item came up late last week on the 3% rule where the 3% is Not based on the loan amount. But rather the amount financed which when we do disclosures is the loan amount Less finance charges.

There is still much confusion out there, and hopefully the dust and questions will be settled within a short time period.

Thanks for the post.

Jan 18, 2014 04:01 AM

Lenn Harley

Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA

Real Estate Broker - Virginia & Maryland

Carla. I will be relying on loan officers more than ever.

Wayne. I too would object to the 3% lender fee rule. Over the years, I've had many buyers with high income wherein we got lender credit for buyers with low cash.

Jan 18, 2014 04:44 AM

Fred Cope

Reliant Realty in Nashville, TN - Nashville, TN

Looking For Homes With A Smile

Lenn, we went thru something like this back in the late 70s and early 80s--all the tightening, added disclosures, et al. Remember the double digit inflation and rates. It began with a President & Congress meddling in commerce and banking. I think he was a peanut farmer. Remember Sen Frank Church and all his grandstanding...

What is so infuriating about this CFPB is the legislators who pushed it are the same ones who caused the housing debacle in the first place: Sen. Chuck Dodd, and Rep. Barney Frank. There meddling and high-handed tactics with the banks over the (CRA) Community Reinvestment Act, then pushing FannieMae and FreddieMac into buying the high risk loans.

Once again it will be the hard-working, consciencious, and tenacoius loan officers and REALTORS® who will have to work through their mess.

I'm glad that this time we have something like ActiveRain® to alert, encourage and educate one another. Onward and Upward...

Jan 18, 2014 03:00 PM

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