I have talked at length in my blog entries about professional service providers. I have also talked about how important it is for a professional Realtor to study everything about the market, lending, politics, etc. As an example of both the information that we need to know AND professionalism exemplified, I have copied the latest news update e-mail that David Grunden of First Financial Bank has just sent out. I am doing this with his permission.
New mortgage rules from the CFPB and more
Hello everybody! I hope you're all keeping warm. It's been a long, cold winter, but the good news is that spring isn't too far away. Welcome Home Funds will be available in March which will hopefully coincide with an warm, early spring this year.
With that out of the way, we are all absorbing the new mortgage rules from the CFPB. The new rules are still fluid, and interpretation of these rules is subject to debate. What I can tell you is 45% is the maximum we see receiving an Approve/Eligible from Fannie Mae and an Accept from Freddie Mac. The new rule was to be 43%, so caution is needed to make sure your clients stay in this range.
Debt-to-Income ratios have never been more important than right now. If you have a buyer who is on the edge of qualifying, just a higher homeowners insurance premium is enough to change the findings to a refer - which would result in a denial of the loan. My advice to you is to strongly encourage your buyers to get a quote as soon as they receive an accepted contract. Insurance can vary on a number of factors including credit, cost to rebuild, distance from a fire hydrant, etc.
Of equal importance is asset verification and documentation. Make sure your Loan Officer receives ALL pages of the bank statements in a timely manner, and make sure the loan officer checks for ANY NSF fees, as this is an automatic downgrade on an FHA, and cause for denial. This has been out there for some time, but it bears repeating.
The appraisal process has also undergone SIGNIFICANT changes, to the point where it can DELAY a closing. The borrower has the right to waive their three days to review it OR they have the right to have those same three days. The Loan Officer CANNOT steer the borrower to choose one box or the other, but if you are looking at doing a quick close, this can impact the closing date. Also, if the home has been "flipped", two appraisals will be required if the property was transferred in the last six months. Therefore, allow for extra time on these properties AND ask the seller or their agent if this has occurred. No lender can expedite a closing for you as this is the law of the land.
Large deposits have become a bit easier to deal with. The new rule allows for deposits of 25% of the borrowers gross monthly income to no longer require an explanation. This is great news, especially for higher income earners.
As we continue to deal with the unintended consequences of continuously enhanced regulations, it is vital to keep these new guidelines in mind when writing a contract and choosing a closing date. If you write a contract using Welcome Home Funds, keep in mind this requires registration, an accepted registration, an approval that is completely separate from ours from the Federal Home Loan Bank that administers the program, and the new appraisal guidelines. Welcome Homestates that their approval takes 4-6 weeks, and we do not have any control over the timing for review. I strongly encourage all parties to be aware of this and to prepare for a 60 day rate lock to avoid expiration. Also, keep in mind if the buyer's property falls through, the borrower cannot use those funds for a different property and they will likely no longer be available. Another final note, any repair order above $500 will automatically cause the Welcome Home Grant to be nullified.
I expect the new legislation and regulations to continue to be a source of consternation for the industry as a whole. If something seems like it warrants further investigation, make us aware of it as soon as possible. The spirit of cooperation and teamwork of all interested parties should be paramount this year as it is everyone's expectation to get the loan to the closing table.
Dave has loaded me, and now you, up with a lot of technical information. He made it clear as to what type of warnings I might need to give my clients and he "pumped me up" with his closing sentence. Is there any question as to who I go to for information about the complications and processes involved in mortgage lending.
Please let me know if you have any questions about the information here, or if you need a real estate professional to help you with your investment decisions (I happen to know a great one).