New Mortgage Rules Take Effect Friday
January 8, 2014
REALTORS® and the Consumer Financial Protection Bureau announced Tuesday in a press conference that they will be closely monitoring the impact of the new rules on borrowers.
CFPB Director Richard Cordray acknowledges there are concerns that the new mortgage rules may tighten consumers’ access to credit. He urged REALTORS®, who are on the front lines, to help ensure home buyers have access to safer mortgages that meet the stronger underwriting standards.
The rules that go into effect include the “ability to repay” rule, in which borrowers must have the financial means to be able to repay the loan amount.
The Qualified Mortgage standard will also take effect. Qualified mortgages cannot be made to a borrower with a debt-to-income ratio of greater than 43 percent, Cordray explained. Qualified mortgages also cannot have certain risky features, “such as paying interest only or even negatively amortizing so that each month the consumer owes more than they did before and loans must have relatively reasonable points and fees,” Cordray said. The rule includes a 3 percent cap on points and fees.
NAR has expressed concern over the 3 percent cap, fearing that it “unfairly discriminates against affiliated lenders who have to count many more items toward fees and points than large retail financial institutions, such as title insurance charges and escrow for homeowner’s insurance,” according to an NAR release.
“The problem is that under this rule, affiliated and nonaffiliated firms are treated differently,” says Chris Polychron, NAR president-elect. “It’s NAR’s view that this would be a disadvantage to many real estate affiliated lenders and reduce the choices available to consumers of where they can get a mortgage, and because the unaffiliated lender must still use a title company, the consumer pays the same amount either way.”
NAR announced it will closely monitor the cap’s impact on access to credit.
“It means a great deal to our new Consumer Bureau to know that NAR has members with boots on the ground in communities both small and large all across the U.S.,” Cordray said at a news conference Tuesday with NAR officials.
Source: National Association of REALTORS(R)
Updated: September 20, 2019