New mortgage loan guidelines create additional barriers for borrowers


POSTED: Friday, January 10, 2014 - 6:48pm

UPDATED: Tuesday, April 22, 2014 - 6:23am

Beginning today, January 10, The Consumer Financial Protection Board's new guidelines take effect in the mortgage industry. This new rule is called the, "Qualified Mortgage Loan and Ability to Repay". This means that mortgage companies, regardless of their former policies, will now need to inform their borrowers that certain loan types will now require a debt to income ratio of 43 percent.

Previously, the debt to income ratio was 50 percent. This major change means that borrowers will now qualify for less home. Home buyers that qualified for $200,000 loans just three weeks ago, now may only qualify for $170,000.

There are three different ways a lending company can deal with these changes. Some are choosing not to offer non-QM loans at all, others may leave the business altogether, and a few will choose to provide the loans with some extra caution. KETK spoke with Margie Fisher, a Branch Manager at Prime Lending in Tyler, who shared, "This puts the emphasis on the mortgage company to provide proof that that borrower does have the ability to repay the debt". If the lending company chooses to offer non-QM loans, the borrower will end up paying more. Fisher said, "You may get a good rate, but you will still be making higher payments because you'll be paying a mortgage insurance premium that's higher than conventional".  Anything that is not a 30 year fixed loan that has a risk factor involved, such as a debt to income ratio over 43 percent, is considered a non-QM.

For those who are looking for a home loan, Fisher has some suggestions. She recommends, "Get pre-approved. Get an in-writing one so that way you are absolutely assured under today's rules that, that home you're getting to contract on, you will be able to actually close on". Fisher also recommends doing your research, and meeting with a reputable lender.

The goal of this rule is to prevent risky loans. However, there are still various interpretations, and many East Texas lenders say it is chaotic mess that everyone will need to figure out after it is already implemented.  For now, there is a tremendous of training, software upgrades, tracking systems, and paperwork that lenders believe will eventually be passed down to the consumer.

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