Restrictions Affecting Mortgage Credit
Thanks to friends at the Consumer Finance Protection Bureau (CFPB), you must be more protected from yourself. Starting July 1, new restrictions affecting mortgage credit have sent the index tracking this to near lows not seen in 7 years. The Mortgage Bankers Association tracks an index (chart below) to estimate how available mortgage credit is to borrowers. With the new administration in Washington and leadership at CFPB, CFPB quashed borrower friendly rules. CFPB implemented rules “to protect consumers” essentially from themselves. That’s right, the CFPB takes away some of your options so you only can use one of their “approved” type of mortgages.
Pick up a copy of Winning Mortgage, Winning Home to compare mortgage types for your specific need. Currently discounted for July at $6.99, read and prepare for the upcoming purchase window we have identified.
High LTV Mortgages Impacted Most
The largest mortgage lenders (Fannie Mae and Freddie Mac) made changes forced on them starting July 1. They also anticipate additional changes in eligibility and underwriting in the following areas:
- The documentation and verification requirements for loans originated under the high LTV refinance option (harder to approve). More time, money, effort, documentation, proof and third party verification become the norm.
- The calculation of the qualifying payment amount and annual percentage rate (APR) for ARMs with an initial fixed-rate period of five years or less changed. Qualifying must consider the maximum rate that may apply in the first five years of the loan. So you might borrow be borrowing initially at 3.00% but must qualify at a rate of 6.00% or more.
Other restrictions affecting mortgage credit apply. Jumbo loans, loans which are greater than the limits on Fannie Mae and Freddie Mac, also faced tighter approval requirements. Some lenders dropped these altogether.
Here is the chart estimating the mortgage credit availability:
