Dodd-Frank impact on 2014 home financing

Dodd Frank impact on 2014 lending

I hope everyone has had a wonderful holiday season.  As we gear up for 2014, there are a number of changes coming down the pipe for residential mortgages.  I wanted to provide a quick summary and links to a couple articles that talk in detail about the new changes.  The new changes will impact many borrowers throughout the country.

The big changes I see:

1. Lender must verify the ability to repay a loan.  In theory this is sound practice for any lender, but in reality there are a number of circumstances that will disqualify borrowers from conventional mortgages.  For example, I recently closed on a loan in Colorado.  The borrowers were purchasing an investment condo for 650,000, they had 450,000 down payment.  They were unable to get a conventional loan because on their tax returns they were not showing they were making ample income to support the loan.  Being small business owners the borrowers expensed a number of items that showed there income was lower than was required by the lender.   This rule will also make it even more difficult for self-employed borrowers to get traditional financing.
2. The max loan limits of conventional loans right now is 417,000 and in high cost areas it used to go up as high at 725,000, under the new changes, the high cost area loans drop to $625,000 and some areas are no longer considered high cost areas.  This will force more borrowers into the jumbo mortgage market where rates are typically higher than in a traditional covered mortgage
3. Increase in mortgage costs.  The two largest government backers of mortgages (Fannie and Freddie) increased their fees to .5% of the loan amount (50 basis points) and this will likely increase to .75% over the course of 2014.  What this means is that loans will be more expensive to the borrower.
4. Articles that talk more about the changes coming down the pipe
   1. The Wall Street Journal
   2. The Washington Post

Fortunately for Fairview Lending, we will continue to provide loans to borrowers that don’t quite fit traditional lending guidelines.  We are focusing on investment single family homes and commercial properties.  We hold and service all of our own loans so we have the flexibility to provide loans that make sense for the borrower and their particular situation.  Call or e-mail us to discuss  your particular scenario.  We are direct lenders and never charge an upfront fee

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