The mortgage industry will continue to see new regulations this year with many of them going into effect in January 2014. The new regulations are a result of the financial crisis and were made with the consumer's best interest in mind. Since 2008, many lenders, including Bell Mortgage, have already implemented many of these rules. Here is a quick summary of some of the new rules:
Debt to Income Ratio Limitation. Lenders originating loans under the general QM definition will be limited to a 43% DTI. While we are not certain how the rest of the mortgage industry will respond, and have heard many of the larger institutions will be limiting the DTI, Bell Mortgage will follow agency and investor guidelines.
The Ability to Repay Rule. Under this rule lenders must collect and verify a consumer's financial information that indicates a consumer has enough assets or income to pay back the mortgage. The rule ensures mortgages will not have balloon payments, interest-only periods, or terms lasting longer than 30 years.
The Equal Credit Opportunity Act (ECOA). ECOA says lenders cannot discriminate based on race, sex, color, religion, age, etc. It goes further to protect against home valuation discrimination, meaning the lender must provide documentation to prove how the valuation is determined. This rule will likely guarantee fair assessment of a home.
New mortgage servicing rules. Homeowners will get renewed protections when they fall behind on payments. New rules from the Consumer Financial Protection Bureau will help to give them better information about the mortgage and help if they have problems making their mortgage payments.
New FHA Loan Limits in Effect
Reductions in the maximum FHA mortgage limits are now in effect for all FHA loans with case numbers assigned on or after 1/1/2014 per HUD Mortgagee Letter 2013-43. The impact of this change in the Twin Cities metro area is a reduction in the max mortgage limit to $318,550 for one unit properties. The limit in this area was previously $365,000. Our metro area includes 14 MN counties and 2 WI counties. The metro counties are as follows: Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Le Sueur, Mille Lacs, Pierce (Wisconsin), Ramsey, Scott, Sherburne, Sibley, St. Croix (Wisconsin), Washington, and Wright.
Cook County in northern Minnesota will have its one unit max mortgage reduced to $282,900. All other counties not mentioned will be reduced to the new FHA floor limit of $271,050 for a one unit, $347,000 for a two unit, $419,425 for a three unit and $521,250 for a four unit property.