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Gold Super Contributor
Jil
Posts: 3,113
Registered: ‎10-24-2011
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Consumer watchdog tightens mortgage lending rules on banks

The rule, effective next year, says a qualified mortgage cannot:

 

Contain "risky" features, such as terms that exceed 30 years, interest-only payments or negative-amortization payments where the principal amount increases.

 

Carry fees and points in excess of 3% of the loan.

 

Be issued to borrowers who, once getting the mortgage, will spend more than 43% of their income on debt payments.

 

 

Source References:

 

http://www.usatoday.com/story/money/business/2013/01/09/consumer-financial-protection-mortgage/18213...

http://www.nytimes.com/2013/01/10/business/consumers-win-some-mortgage-safety-in-new-rules.html

http://www.reuters.com/article/2013/01/10/us-financial-regulation-mortgages-idUSBRE90904V20130110

Gold Regular Contributor
sheriff
Posts: 2,292
Registered: ‎06-01-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks

this is a good thing.  All mortgages should already be conforming to these rules anyway.  It protects people from being taken advantage of by banks.  The only thing is banks can still make risky loans, they just won't be protected from consumer lawsuits.

Platinum Super Contributor
buyinghouse
Posts: 5,879
Registered: ‎04-23-2011
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Re: Consumer watchdog tightens mortgage lending rules on banks

  But, banks have given loan modifications with 40 years loans?

 

  Me no get it......

Silver Regular Contributor
Fishmarty
Posts: 681
Registered: ‎08-25-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks

Crying babes all around!

 

'You don't give me loan and it is not fair because I am poor?'

 

Now 'you give me too much and rip me off'!

 

I thought you were the one at the beginning to go out and free to choose a bank to pick a loan. And you were given a pile of paper to look at the terms before signing it.

 

You know what, we have a group of buyers in Shanghai China brought some units in a new building, a few months later, price dropped (it was a free market) and this group went ahead to demand difference back!

 

Yeah if you allow it, you always have people coming to you arguing. Like greed doesn't apply to them.

 

 

Silver Regular Contributor
sfsfr
Posts: 689
Registered: ‎04-15-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks

The cynic in me is waiting for opposition to this because it is "unfair to the poor".
Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: Consumer watchdog tightens mortgage lending rules on banks

Well I for one am unhappy about this.  I recognize why rules like this are necessary but I also understand why mortgages like this were created in the first place.

 

Fewer than 14% of recent home loans sold to mortgage giants Freddie Mac and Fannie Mae had debt-to-income ratios above 43%, says mortgage tracker Inside Mortgage Finance.

 

So if you have an income of $20K/mo with 3 houses, 2 of which are rentals that are cash flow negative by $1K each per month.  Your current mortgage is $4K.  You want to buy a new house, keep your existing one as a rental (so now you will have 3 rentals and one primary mortgage).

 

With these new rules you cannot get a new mortgage that would take your debt to over $8600/mo, but you already have $6K in mortgage debt so your new loan has be be $2600/mo or less?

 

With a $20K income - assuming you max out at $8600 mortgage debt, that still leaves you with $11.4K/mo for "living expenses".

 

The law of large numbers blows up on these various mortgage rules.  I don't care if the govt wants 43% DTI rules for fannie and freddie, but this seems to be something they are proposing for *all* mortgages.

Gold Regular Contributor
sheriff
Posts: 2,292
Registered: ‎06-01-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks

Doesn't debt to income ratio include rental income?

Silver Regular Contributor
Fishmarty
Posts: 681
Registered: ‎08-25-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks


Michelle1x wrote:

With a $20K income - assuming you max out at $8600 mortgage debt, that still leaves you with $11.4K/mo for "living expenses".

 


Could 'income' mean before tax? You will take out 33% tax to get to the 'living expenses'.

Silver Trusted Contributor
Michelle1x
Posts: 1,063
Registered: ‎02-17-2008
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Re: Consumer watchdog tightens mortgage lending rules on banks


sheriff wrote:

Doesn't debt to income ratio include rental income?


yeah but my point is just that for any type of income, anybody with more than say, $20K income per month is going to feel constrained with arbitrary DTI rules like this.

 

Why should a family making $30K/mo be constrained to total mortgages of only $12,600?  What are they going to do with the other $17,400 they make per month?

Silver Regular Contributor
Fishmarty
Posts: 681
Registered: ‎08-25-2012
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Re: Consumer watchdog tightens mortgage lending rules on banks


Michelle1x wrote:

sheriff wrote:

Doesn't debt to income ratio include rental income?


yeah but my point is just that for any type of income, anybody with more than say, $20K income per month is going to feel constrained with arbitrary DTI rules like this.

 

Why should a family making $30K/mo be constrained to total mortgages of only $12,600?  What are they going to do with the other $17,400 they make per month?


I believe as home price climbs, someone will have to change the 'law' again to favor borrowing, sooner or later.

 

Banks want to lend and government wants to collect more tax incomes from home owners for sure. They want you to be able to buy and own expensive larger houses carrying large loans.

 

Government always reacts slowly and these 'new laws' we are talking about only relfect 2007 crisis.

 

You would think after that late eighty big fire in Oakland hills would stop people from rebuilding dense housings in that same area. See what happens.

 

Money talks, aways.