1. QM stands for “Qualified Mortgage” and is something you are going to hear a lot about in the weeks to come. The government’s intent is to force lenders to offer less risky mortgages by implementing a set of more cautious
mortgage rules set to go into effect January 10, 2014. The result will be an even greater level of underwriting scrutiny than we are presently experiencing.
2. Changes are already starting to take place in the mortgage industry as a reaction to January’s launch of the new QM rules. Gone is the 3% Down Conventional loan program that an occasional buyer with good credit would use. So, 5% is now the minimum down for all Conventional loans, even on HomePath. Another big change is the maximum Debt Ratio on all Jumbo loans will now be capped at 43%. It was common to take this up to 45-50% on occasion and when it made sense. Neither of these changes are good for the consumer, the lender, or you!
3. Janet Yellen testified last week at her confirmation hearing to replace Ben Bernanke as the Chair of the Federal Reserve. Essentially, she stated that the Fed will continue with the policies currently in place and will not scale back
the Fed’s bond purchase program until there are signs of sustainable economic growth. In short, her comments suggest that the Fed is in no rush to tighten monetary policy.
4. Investors viewed Yellen’s dovish comments as good news for mortgage rates. Aslong as the Fed keeps purchasing bonds, mortgage rates will stay low. When good economic news starts coming out, expect the Fed to stop the program and rates to rise.
5. A reminder that FHA recently changed how and when collections that show on a buyer’s credit report have to be paid. The key amount to know is $2,000. FHA will not require collection accounts to be paid off if the total balance of all collection accounts is less than $2,000. If the balance is over $2,000, then it will be up to the underwriter’s discretion to analyze the buyer’s ability to pay and make a judgment call. It is worth noting that some payment plans will be acceptable as long as the payment is verified and included in the borrower’s debt ratio. Also, medical collections do NOT have to be counted as part of the $2,000 and normally don’t have to be paid off but tax liens and judgments always do have to be paid off.
6. Another recent FHA change is how any “disputed” accounts showing on a credit report must be handled. FHA will allow disputed accounts to remain on a credit report if the total balance of all disputed accounts is under $1,000. If the balance is over $1,000, then the buyer must deal with the disputed accounts and have them removed from the credit report. This is handled by calling the creditor and resolving the dispute, which usually takes time and money. Worth noting, if the disputed account has never been late, is older than two years, or has a zero balance, it does not have to be included in the $1,000 limit. Same goes for medical accounts and any accounts tied to identify theft. This information is supplied by: Mark Moore of Shelter Mortgage Company
Need a home? Drop me a line at: EARL@EARLPARK.NET OR phone: 770-377-5793