02/03/2014

New Housing Rules Take Effect
By Kathy Conley – GreenPath Housing Specialist

The financial crisis of 2007-2010 led to calls for changes in many of our regulatory systems, including those covering mortgages. The Consumer Financial Protection Bureau (CFPB), established by the Dodd-Frank Act that was signed into law in 2010, is one of those changes. The CFPB recently established new mortgage rules regarding Qualified Mortgages and Ability-to-Repay.

Qualified Mortgages

Lenders are now incented to offer Qualified Mortgages (QMs), which are mortgages based on some common-sense ideas, such as verifying that the borrower is able to repay the loan and actually understands the loan.  To obtain a standard QM, no more than 43 percent of your gross monthly income should be needed to pay your mortgage, and other monthly debt.  QMs do not have risky features, and also limit up-front points and fees a borrower may be required to pay.

Ability-To-Repay

The Ability-to-Repay rule means that your lender is required to evaluate your ability to repay the loan.  The days of “no document” loans are gone!  Remember, just because a lender is willing to loan you money, does not mean it is the right loan for you!  It is important that you carefully consider how the mortgage payment fits within your specific budget, and ensure that it still leaves you money to reach other financial goals.

GreenPath offers a wide array of free housing counseling. Call our GreenPath Housing Department at 888-860-4167 for free Pre-Purchase, Budget and Credit counseling. Counselors are available Monday through Thursday, 8am-10pm; Friday from 8am-7pm, and; Saturday from 9am-6pm. All times are Eastern.