Saturday, December 28, 2013

Prepare for 2014 Mortgages

Mortgage Dilemma

Mortgage underwriting and application processes will change in 2014.   Due the legislation passed in wake of the 2008 financial meltdown, new regulations impacting mortgage financing will begin in 2014.

The Dodd Frank Wall Street Reform and Consumer Protection Act is a broadly written law that covers many financial aspects of our lives.  One particular element is mortgage financing.

Recently, David Katz with Monarch Mortgage provided a brief overview of the impact that I need to share with you.   As David put it, these are only the highlights as the actual regulations and rules have not be provided to mortgage companies by the Consumer Financial Protection Bureau.  This Consumer Financial Protection Bureau is in charge of defining all rules and regulation within the context of the Dodd Frank Act.

In 2014, mortgage providers will evaluate a buyer's "Ability to Repay"(ATR) and provided a "Qualified Mortgage"(QM) or a "Temporary Qualified Mortgage"(TQM).  Though these terms will be important to understand, it is the process to determine ATR and define QM or TQM  that could be the most important element to understand.

According to David, the expectation is that the steps to ascertain a buyer can afford a home and to connect them with a mortgage will be very similar.
The significant change is that the mortgage officer/bank will need to document every part of the process in writing!!

You may think this is no big deal.  Yet, you must consider that the mortgage officer could frequently call your employer to verify that you have a job and will have in for the foreseeable future.  In the future, it is expected a letter will be sent to the employer to verify said employment.  As this process is done early in the pre-approval process AND again a few days prior to closing.

No big deal??  It is if a buyer was hoping to close in 30 days as we typically do today.

Add the myriad of other information that a mortgage office has always collected but must now verify in writing, we will see closings take longer and longer.  Without seeing the regulations yet, David surmised that closing will take 45 to 60 days at minimum.

As it is seen now, it won't matter if you are well financed or are stretching to get the down payment on your new home.   The process itself will be a longer and more arduous talks.

Stay tuned for up to the minute updates as Regulations become codified!!!

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