“Ability to Repay Rules”

“Ability to Repay Rules”



There are many rules that have come into play in the mortgage industry over the last few years, but more so in 2015. When it comes to the ability to repay a mortgage the repayment rules should be pretty obvious, but in some cases these rules have gotten out of hand.


There were many loan types that were created that should never have been allowed as many got into trouble. Sure, greed came into play very often and abuse became part of the mortgage landscape. There were lots of foolish consumers that participated that had no business taking out some of these loans.


We have now come full circle and gone to the other extreme. Here is a perfect example when it comes to Government loans. I was sitting with a client the other day to do a mortgage application and the loan can’t be done because of new FHA guidelines.


This borrower has co-signed student loans for his child, totaling $118,000. Even though they are deferred for the next two years we now have to show a payment equal to 2% of that amount and in this case that would be $2360. Without this payment the debt ratio is 44% and under normal circumstances an easy loan to do for the client but including the student loan payment, the debt ratio is 69%.


This is now the third loan this month that I could not do because of the “ability to repay” rules, the new and improved rules that are supposed to protect the consumer “from themselves”. This is only one example. There are many more and we wonder why homeownership in this country is at nearly a 50 year low.


I would really like to hear your thoughts on this topic.


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Joe Petrowsky, NMLS #6869

Right Trac Financial Group, Inc. NMLS #2709

110 Main St.

Manchester, Ct. 06042

Office: 860 647-7701 x116

Fax: 860 647-8940

Cell: 860 836-9294

Email: joe@righttracfg.com



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Comment balloon 30 commentsJoe Petrowsky • December 04 2015 02:50AM


Joe: You are absolutely right, it is getting harder and harder for potential buyers to qualify for a mortgage. 

Posted by Anita Clark, Realtor - Homes for Sale in Warner Robins GA (ColdwellBanker SSK Realtors ~ 478.960.8055) about 4 years ago

Hmmm...I'm not sure I fully agree...or maybe I don't understand.

If the person co-signed the loan they are responsible, so logically it should be counted in their ratio.  The fact that there is 2 year deferral shouldn't matter because in 2 yrs they still will own their mortgage and still have this as a potential liability.

Posted by Women of Westchester Working Together, Women helping Women get ahead (Women of Westchester Working Together) about 4 years ago

Seems to me like the law does protect the consumer unless I'm missing something.

Posted by Roger D. Mucci, Lets shake things up at your home today! (Shaken...with a Twist 216.633.2092) about 4 years ago

Hi Joe.  But, what happens two years from now when that student loan is no longer deferred?

Posted by Gabe Sanders, Stuart Florida Real Estate (Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales) about 4 years ago

Good morning Joe. Whane it comes to student loans, the entire system is screwed up and many who have to the ability to repay are still walking away. Not sure of the solution, but recognize the problem! Enjoy your day!

Posted by Wayne Martin, Real Estate Broker - Retired (Wayne M Martin) about 4 years ago

Hi Joe.  I don't know about this one.  Two years goes by very quickly.  How are they supposed to afford the home with a 69% debt ratio.  I don't think they are qualified.

Posted by Conrad Allen, Webster, Ma, Realtor (Re/Max Professional Associates) about 4 years ago

Joe -  rather than uncomplicate the complicated when the government gets involved it is "complicate the uncomplicated."

Posted by Grant Schneider, Your Coach Helping You Create Successful Outcomes (Performance Development Strategies) about 4 years ago

Good morning Joe.  While I may not agree with all the rules that are in place they are the rules.  Clearly another point well taken.

Posted by James Dray, Exceptional Agents, Outstanding Results (Fathom Realty) about 4 years ago

Good Morning Joe,

All I can say is that I feel sorry for the parents who have to bear the consequence of co-signing for such a colossal amount. But what parents would not do this for their child.

I hope that the child will be able to get a fruiful job to repay the student loan without putting the burden on the parents.


Posted by Maria Gilda Racelis, Home Ownership is w/in Reach. We Make it Happen! (Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington) about 4 years ago

Good morning Joe,

Something stupid like this they will regulate as they have the Mortage Brokers to enforce it. Some of the other laws AFC and one I wont mention are to penalize the populace and as there are not enough peons to enforce them it keeps them in the public eye stating we need more laws.

Make yourself a great day.

Posted by Raymond E. Camp, Licensed Real Estate Salesperson Greater Rochester (Howard Hanna Real Estate Services) about 4 years ago

Consumers could only be as foolish as the lenders allowed them to be....and created that trust...I don't llay blame on the consumers when they went to an instituion they had reason to trust.

Posted by Sally K. & David L. Hanson, WI Realtors - Luxury - Divorce (EXP Realty 414-525-0563) about 4 years ago

Joe Petrowsky In the case of this potentil borrower, I am sure he would have co-signed anyway as children come first. Nevertheless, the loan underwriters are coming with all sorts of insane requirements that ou preferred mortgage brokers haven't a clue about where they are coming from. It is as if the banks really are not interested in making loans. 

Posted by Sandy Padula and Norm Padula, JD, GRI, Presence, Persistence & Perseverance (HomeSmart Realty West & Geneva Financial, Llc.) about 4 years ago

Good morning Joe. This is incredible. Too bad that it is now a new wrinkle.

Posted by Sheila Anderson, The Real Estate Whisperer Who Listens 732-715-1133 (Referral Group Incorporated) about 4 years ago

Yes, You are right Joe Petrowsky if the re-pay rules had been in effect then nobody would have got into a neg-am loan that would reset and recast to a fully amortized loan at a higher rate. These loans were designed to fail.

Bill Roberts

Posted by Bill Roberts, "Baby Boomer" Retirement Planner (Brooks and Dunphy Real Estate) about 4 years ago

Joe, all I can say is when Government is involved things become complicated. 

Posted by Frank Rubi, FrankRubiRealEstate.com (Frank Rubi Real Estate, LLC) about 4 years ago

Good mornign, Joe Petrowsky all I can say is "WOW" to that student loan payment.... unbelievable.... 

Posted by Barbara Todaro, Marketing Agent for The Todaro Team (RE/MAX Executive Realty ) about 4 years ago

Joe, I agree pre '08 days allowed many to get a loan when they had no business getting one, but they have gone too far to the extreme now.

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (House to Home, Inc. - Denver Real Estate - 720-231-6373) about 4 years ago

New and improved...Arghhh!

Posted by Lawrence "Larry" & Sheila Agranoff. Cell: 631-805-4400, Long Island Home and Condo Specialists (The Top Team @ Charles Rutenberg Realty 255 Executive Dr, Plainview NY 11803) about 4 years ago

That's tough, you want to help your children get their education, but that seems to have a consequence that the parents hadn't thought of. Hope they have a home with a current loan and that this is only refinancing. 

Posted by Hella Mitschke Rothwell, Hawaii & California Real Estate Broker ((831) 626-4000) about 4 years ago

Joe, when I got my student loans I signed for them and was responsible for them, never knew that now the parents co-sign for them..... that will be a game changer on many mortgages.

Posted by David Popoff, Realtor®,SRS, Green ~ Fairfield County, Ct (DMK Real Estate ) about 4 years ago

The government does a great job at crushing the American Dream. With Trump's history in Real Estate and his own personal success stories, perhaps that's why he's ahead of the pack on the Republican side right now. 

Posted by Patricia Feager, MBA, CRS, GRI,MRP, Selling Homes Changing Lives (DFW FINE PROPERTIES) about 4 years ago

Hi Joe --- it seems the pendulum has swung a bit too far in some of the newer lending guidelines -- it's time for a more balanced approach to sensible mortgage rules.  

The "student loan" issue in our country is out-of-control I believe because they are so readily and easily available.    It is something that will weigh down our country not just for years but possibly decades(or more).  


Posted by Michael Jacobs, Los Angeles Pasadena 818.516.4393 about 4 years ago

I know nothing about student loans, Joe.  When the child graduates and gets a job, can the parents be removed as co-signors?

Posted by Carol Williams, Retired Agent / Broker / Property Manager (Although I'm retired, I love sharing my knowledge and learning from other real estate industry professionals.) about 4 years ago


I concur with Michael Jacobs .  Whenever there is a looming issue, everyone is motivated by the worst case scenario when it comes to coming up with a solution, so here is another example of a mess!  A

Posted by Ron and Alexandra Seigel, Luxury Real Estate Branding, Marketing & Strategy (Napa Consultants) about 4 years ago

Joe I am still trying to figure out who the rules are suppose to be protecting, but one thing I know for sure, it isn't the Borrower.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 4 years ago

Joe, I don't know about that one.  It seems like it is still a debt obligation as a co-signer regardless of being deferred.  The obligation on the mortgage is there and if the co-signor ends up making good on the co-signed student loans ... then the ability to pay may not be there.  Does that protect the borrower?  I don't know.

Posted by Kathleen Daniels, San Jose Homes for Sale-Probate & Trust Specialist (KD Realty - 408.972.1822) about 4 years ago

It is  situation that will be around for many more years and will keep a lot of buyers in their parents homes for a long time

Posted by Ed Silva, Central CT Real Estate Broker Serving all equally (RE/MAX Professionals, CT 203-206-0754 ) about 4 years ago

A stupid rule Joe, there should be some way to make it happen in these FHA loans.

Posted by Noah Seidenberg, Chicagoland and Suburbs (800) 858-7917 (Coldwell Banker) about 4 years ago

This is very good information to share. It is easy to see how these rules can adversely impact many families.

Posted by Roy Kelley (Realty Group Referrals) about 4 years ago

Another knee jerk reaction by politicians that know NOTHING  about the mortgage business Joe Petrowsky .   It's a shame there are no mortgage loan originators in government.

Posted by DEANNA EARLY - - ( NMLS # 268590 ), Highest Ranked Mortgage Loan Originator Virginia (American National Bank & Trust) about 4 years ago