Month: May 2017

Mortgage Requirements Ease in 2017

Your Next Mortgage:

Obtaining a mortgage can be a difficult process for some however mortgage requirements have recently been eased by Fannie Mae.  Everyone knows that after 2008 the lending industry pulled backed and made it more difficult than pre-2008 to get a new mortgage. And I think it’s safe to say that everyone agreed it was the Home Brownnecessary path considering that you were able to borrow a million dollars, put nothing down and show no income during the height of the real estate boom.

Qualified Borrowers:

However around 2015 you started hearing that maybe Fannie Mae, Freddie Mac and the banks have gone too far; made it too difficult for qualified borrowers to get a new mortgage.  There were some valid concerns however the restrictions never got as bad as 40 plus years ago.  It’s long been rumored that Fannie Mae and the lending industry were going to loosen guidelines to bring in more buyers and qualified applicants.  It’s no surprise that with dwindling mortgage loan volume we’re now seeing Fannie Mae introduce more lenient guidelines.

Fanne Mae Underwriting:Home Kitchen

Recently Fannie Mae introduced an update to their underwriting guidelines that eases the Debt To Income requirements currently in place.  It’s important to know these types of guideline changes have no affect on mortgage rates.  So getting a low home loan rate does not depend on these changes; and only depends on current market factors, your home (or home your about to purchase) and your credit score.

Mortgage Requirements Continued:

Back to the mortgage requirement changes; the implementation of these new underwriting guidelines will take place July 29th however the information released about the changes just came out so lenders can prepare for the updates.  The main change is the Debt To Income ratio.  Fannie Mae is now allowing a 50% DTI where as it used to be 45% unless there were some super strong compensating factors.  A compensating factor would be 12-24 months of liquid assets along with a very low Loan To Value ratio and a top credit score.

Mortgage Pre-qualifyCompensating Factors Not Needed:

If you had all three in place then you might get lucky with a DTI above 45% under current guidelines.  On July 29th that changes, and you don’t need a compensating factor (s) to go up to a 50% DTI.  The good news is the best California mortgage rates are available even if you are at a 46%-50% DTI!  So there is no penalty if you are a borrower that might have a higher than normal Debt To Income ratio.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.

Directly from the Fannie Mae update here are some of the details of the changes that will take place in July (DU stands for Desktop Underwriter and this is the software that is used to underwrite loans under Fannie Mae guidelines):

PER FANNIE MAE:

  • DTI simplification: The maximum allowable debt-to-income ratio (DTI) will be adjusted in DU Version 10.1. Under the adjustment, DU will consider applications with a maximum DTI up to 50%. For DTIs above 45% and up to 50%, DU will no longer require certain additional compensating factors. If the DTI on a loan casefile exceeds the maximum allowable DTI of 50%, the loan casefile will receive an Ineligible recommendation.
  • DU Refi Plus™ loan casefiles submitted to DU Version 10.1 will continue to be subject to the maximum allowable DTI applied to DU Refi Plus loan casefiles in DU Version 10.0.
  • ARM enhancements: With DU Version 10.1, the maximum allowable loan-to-value (LTV) ratios for adjustable-rate mortgages will be aligned with fixed-rate mortgage LTV ratios. This alignment will be for all transactions, occupancy and property types, up to a maximum of 95%.
  • Simpler self-employed borrower documentation requirements: DU Version 10.1 will simplify IRS tax return documentation requirements for many self-employed borrowers. The number of DU loan casefiles eligible for the one year (instead of two years) of personal and business tax return documentation requirements will increase.
  • Disputed tradelines: DU will assess the risk using any disputed tradelines, and lenders will not be required to investigate the disputed tradelines if the loan casefile receives an Approve recommendation when using the disputed tradelines.

Dodd-Frank Replacement Financial CHOICE Act

Financial Choice Act:

Dodd-Frank took years to formulate and pass into law; and then it took years for the mortgage industry to figure everything out.  Just as the mortgage industry has settled in to Dodd-Frank, Republicans want to replace it!  The replacement Republicans have come up with is the Financial CHOICE Act which the Democrats have Home Greennicknamed the WRONG Choice Act.

Gridlock:

Democrats on the House Financial Services Committee held a hearing and not surprising no Republicans showed up-gridlock at its finest. A Dodd-Frank replacement received new life with the election of Donald Trump as some argue Dodd-Frank prevents lenders from lending.  Other’s argue by saying that simply is not true.  The truth is, according to supporters of Dodd-Frank, is that lenders are able to lend and just look at the rise of personal debt since Dodd-Frank enactment as proof.  House Democrats are against a repeal and want the Republicans to join them in reforming the current law.

What Dodd-Frank isn’t and is:

To be clear; Dodd-Frank does not determine how low mortgage interest rates can go or how high they can go.  Dodd-Frank is a post-2008 financial crisis law that dictates various things including proper lending guidelines and disclosures.  While it does require residential mortgage lenders to justify and document the mortgages they provide; some people are under the wrong impression that Dodd-Frank has a direct influence over mortgage rates.

Maxinne Waters:Mortgage Pre-qualify

Representative Maxine Waters is a vocal critic of the repeal and she said at the hearing:  “We’ve asked for this second hearing to hear from experts and well-informed witnesses who know, understand and appreciate the importance of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and who can point out the dangers of the Wrong Choice Act,” Rep. Maxine Waters (D-Calif.) said. “Now, even with this additional hearing, we cannot fully cover all of the many ways this bad bill would hurt hardworking Americans. We would need dozens more hearings to do that. But with this slate of outstanding experts here today, we will have the opportunity to educate the public about some of the harmful repercussions of the Wrong Choice Act.”

Republicans:

Republican’s are falsely claiming that Dodd-Frank protects the banks and not the consumers which simply is not true.  Dodd-Frank and the CFPB have brought about significant improvements when it comes to protecting borrower’s looking for a new mortgage.  The CFPB has done a decent job in going after mortgage companies for false advertising and illegal kick backs which also helps consumers by filtering out the “bad apples” in the mortgage industry. While not perfect; Dodd-Frank does a best California mortgage rategood job however it does need to be reformed to ensure that it works for those that it’s supposed to protect and doesn’t impede their ability to obtain financing.

Current Mortgage Rates:

If you are looking for current mortgage rates we have you covered on our current mortgage rates page. We’ll not only keep you up-to-date with where mortgage rates are at but also cover important bond market information and general economic news that may influence mortgage rates.