“Mortgage Regulations, Good News and Bad News”

The article below addresses some of the changes going forward, some better, some not so much. It never ceases to amaze me, that the current administration, much of the Congress and Senate and all related agencies don’t understand how much of regulations have stymied our economy.

Let me relate how much impact over regulations have hurt my mortgage business. I am fortunate to have a large mortgage practice, but I turn away 30 out of every 100 individuals and families that I can’t help, because of over regulations. Just think about 30% more home buyers. It is not that they aren’t go potential homeowners. Here is an example.

Paul came to my office to get prequalified for a mortgage to purchase a home in Manchester, Ct. He wanted to move from Hartford and closer to most of his customers. He was presently paying $1,250 per month rent, the immediate problem was that he was paying cash to his landlord, as that is what they wanted. He had rent receipts that the landlord gave him. Unfortunately, unacceptable to lenders, as they want cancelled checks or a verification from a management company. There were a couple of other minor issues, but paying rent in cash was a guideline I can’t overcome.  The home that he wanted to buy, would have meant a mortgage payment of $1,090 per month. This guideline/regulation makes me crazy. Now that I have coached him, next year he’s be a ready buyer, unless the guideline is changed.

Mortgage Rule & Regulation Updates – November 2011

By KarenDeis

Let’s start these updates with some good news out of Freddie. They are relaxing some of the income verification requirements when it comes to Social Security, retirement, survivor and dependent benefits, long-term disability, and public assistance. They are now only requiring proof of receiving the income for two months.

For alimony, child support and separate maintenance, it’s the most recent 6 months (down from 12 months). However, you’ll need to still verify that the income will continue for the next 3 years.

If you’ve had any deals turned down…or pre-quals waiting to verify income based on any of these sources, you might want to go out there and bring them back to life. Oh, and this is just Freddie. Fannie may not be far behind.

While Freddie has loosened up a little, VA underwriting is going south—with the latest DU for Government Release notes. They are tightening up on credit. And it’s all going to happen around Dec 17 or so. So, here’s what could happen to you. On Friday, Dec 16, you could have a loan that’s approved. If you have to rerun it for any reason, on Monday Dec 19, it could switch to “refer” status.

While they didn’t really come out and say it, the key trigger here seems to be credit scores under 680. My suggestion? Check every one of the VA loans in process, especially those under 680 credit score, and then to get it re-approved before they hit the switch.

Speaking of VA, the funding fee fiasco just might be over. VA sent out a circular “predicting” that when November 18 rolls around, that the scheduled funding fee decrease will NOT happen. However they provided a website link to keep you informed. What we have been hearing from some loan officers–they have sent out GFE’s with the lower funding fees and if you have done that, you might want to send out new ones.

And just a quick heads up if you do USDA loans. They added a lender condition that you will NOT be able to find in their guides. It’s in regards to “Authorized User” accounts and if your borrower has such an account, the loan will go to a “refer” status if they can’t comply with any one of the three scenarios. Watch for Code 6000.