06 Jan Real Estate Review and New Mortgage Loan Rules
Amid the signs of a strengthening economy and a rebound in consumer confidence, 2014 started the year with long-term mortgage interest rates edging upward. Freddie Mac says the average rate on a 30-year fixed-rate mortgage was 4.53% in the week ending Jan. 2, up from 4.48% last week. That’s a far cry from the record lows hit in November 2012, when 30-year rates averaged just 3.31%. The average rate on a 15-year fix rose to 3.55% this week, up from 3.52%. A one-year adjustable-rate mortgage averaged 2.56%, unchanged from last week.
2014 will also cause real estate officials to brace for new federal mortgage rules that are intended to press lenders to ensure that their prospective borrowers are going to be able to repay their home mortgage loans. Starting within the week, lenders will be required to examine eight types of financial information about potential borrowers, including their income and their debts.
These rules, issued by the Consumer Financial Protection Bureau (CFPB), are designed to prevent the kind of risky loans that contributed to our recent financial crisis. According to the CFPB, under the ‘ability-to-repay’ requirements, lenders will have to make a “reasonable, good-faith determination” that a borrower is going to be able to repay their home mortgage loan before a lender can provide a loan. Borrowers will be required to provide documentation for all information required throughout the loan process while lenders will be required to assess a borrower’s other financial obligations, such as alimony and child support, and also a borrower’s debt-to-income ratio and credit history.
Some real estate officials say that one of their biggest worries is that these new rules will make it harder for low-income and first time homebuyers to her a home mortgage loan. Janet Gaglione, President of the Charlotte Regional Mortgage Lenders Association, said, “This definitely affects the lower-income borrower, by far. We’re going to have very strict guidelines. This law is trying to make every lender accountable for every unknown factor that could happen during the term of the loan.”
Mark Vinter, an Economist for Wells Fargo, said “my greatest concern about the rules is the impact they will have on first-time homebuyers. Home purchases by first-time buyers are experiencing a weaker recovery compared with the upper-end of the housing market, which has posted stronger gains as the stock market has rebounded.” He continued, “First time homebuyers seeking adjustable-rate mortgages could be especially affected. Under the ability-to-repay rule, when a lender is calculating a borrower’s debts the highest interest rate expected over the life of the loan must be factored in and that could make it hard for some first-time borrowers to qualify for adjustable-rate mortgages, which have been a way to make homes affordable for young people just starting in their careers.”
Additionally, borrowers in regions with lower home prices might face a big effect once these rules come into play. Lower loan amounts could make it hard to keep home mortgage loan interest rate points and fees within limits. David Whitley, Vice President of Whitley Mortgage said that, “As a way to help borrowers meet points and fee thresholds, lenders might not charge underwriting fees however, they might charge higher interest rate to compensate.”
While it is still unclear how the rules will affect the recovery of the housing market it is not likely that borrowers and lenders should expect irreparable harm to our economy but can look forward to a few probable hiccups along the way. With rising home mortgage loan interest rates, right now is one of the best times to consider all of your home buying or selling options. Whether you are buying a new home or looking to refinance your current home, you can trust Fairway Independent Mortgage of the Carolinas to make your home loan as stress-free as possible. Call one of our offices today to get started or schedule an appointment with you to really look at your financial plans and help you make the best home loan decision or show you how the path toward ownership. Call us anytime. We have locations across the Carolinas to make meeting convenient, or simply fill out our online application to get started.