The Anna Maria Island Sun Newspaper

Vol. 13 No. 16 - January 30, 2013

REAL ESTATE

Mortgage crisis produces new home lending rules

 

If you think mortgage lenders were complicit in the financial meltdown, you will probably agree that more stringent banking guidelines are necessary. Two weeks ago, the Consumer Financial Protection Bureau issued the long awaited rules intended to spell out how lenders ensure that borrowers can repay their home loans intended to protect taxpayers against future bail outs, but watch out for the unintended consequences.

Like all new guidelines, it will take a while to see the real affects of these policies, which are intended to implement financial regulations created in the 2010 Dodd-Frank overhaul. The rules go into effect Jan. 1, 2014 and once implemented it is likely that banks will narrow their loan offerings and rely more on 30-year fixed rate mortgages considered safer and usually come with government guarantees. Because borrowers will need to qualify on higher monthly payments, the pool of qualified buyers could shrink considerably. This comes on top of mortgage qualification standards that have already grown very strict, requiring reams of paperwork and tough appraisals in order for banks to make their loans bulletproof.

The Consumer Financial Protection Bureau created a new category of loans called qualified mortgages. Qualified mortgages are designed to put the onus on the banks to adequately qualify the borrower. Regulators and courts would presume that lenders had reason to assume a borrower could repay. If a borrower determines the loan is unaffordable, borrowers can sue the lender for damages, at which point it would be up to the banks to prove they met the qualified mortgage definition in granting the loan.

In addition, certain product types are excluded from being a qualified mortgage like interest-only loans, loans where the principal balance rises over time and many exotic mortgages that were popular during the subprime era. Also, Jumbo loans that exceed government loan ceilings, which currently stand between $417,000 and $729,750 based on regional housing markets, could be facing tighter standards in order for them to meet the ability to repay statute.

Under the new rules, borrowers would be required to qualify for adjustable rate mortgages based on the highest payment that will apply in the first five years of the loan. Lenders also would have to thoroughly vet the finances of borrowers and make sure they spend no more than 43 percent of their pretax income on loan payments. The new rules cap loan origination fees at 3 percent of the loan amount with relaxed limits for loans under $100,000. The new rules don’t specify a minimum down payment for borrowers, but rather emphasizes the borrower’s ability to make their monthly payment.

In spite of these new regulations, lenders can still makes loans that aren’t considered qualified mortgages, however, most say they won’t considering the liability involved. Since Fannie Mae and Freddie Mac will not guarantee unqualified loans investors are unlikely to bundle these loans into securities that can be sold as an investment vehicle.

Government officials say these new rules should help to invigorate the mortgage market by assuring investors that the loans they buy from banks are sound. In the existing mortgage market, sound is defined as mortgages that are guaranteed by the government, which now can only be a government sanctioned qualified mortgage.

Will the unintended consequences of the Consumer Financial Protection Bureau’s rules be fewer buyers being able to qualify for a home mortgage slowing down the fragile housing recovery? Or will it create the perfect no fault mortgage qualifying utopia for eternity? We’ll have to wait and see.

Real Estate Transactions
Real Estate Transfers from October 2012
Sponsored by Alan Galletto Island Real Estate

Sold Date | List Price | Sold Price | Address | Provision | Property Style

Anna Maria

11/05/2012 1,089,000 1,000,000 511 Loquat Dr 2752 85x117 3 Br/2 Ba SFR
11/09/2012 749,000 700,000 108 Willow Ave 1504 50x11 3 Br/2 Ba SFR 11/14/2012 429,000 429,000 516 Magnolia Ave 1401 52x145 3 Br/2 Ba SFR 11/14/2012 575,000 540,000 212 Coconut Ave 1653 52x100 3 Br/2 Ba SFR 11/15/2012 475,000 442,500 771 Jacaranda Rd 1447 52x98 2 Br/2 Ba SFR

Bradenton Beach

11/05/2012 325,000 230,000 301 Church Ave 1344 102x100 2 Br/2 Ba SFR, Short Sale
11/13/2012 399,000 395,000 303 22nd St 50x100 3 Br/2 Ba Inc. 11/16/2012 330,000 320,000 2407 Avenue B 1650 25x100 4 Br/4 Ba Inc.
11/16/2012 597,000 555,000 104 23rd N St 2088 5800 Units Inc.

Cortez

11/29/2012 579,000 560,000 4130 Marina Ct # 511 2307 3 Br/2 Ba Condo
11/20/2012 825,000 825,000 12913 42nd W Ter 4058 5 Br/3Ba SFR Short Sale
11/02/2012 69,000 54,750 12614 Safe Harbour Dr 81x123x61x122 Vac.

Holmes Beach

11/05/2012 325,000 325,000 6200 Flotilla Dr # 242 1458 2 Br/2 Ba Condo
11/09/2012 499,000 445,000 7205 Gulf Dr # North 1032 3 Br/2 Ba Condo
11/20/2012 179,900 165,000 3607 E Bay Dr # 105 976 2 Br/2 Ba Condo
11/30/2012 475,000 465,000 3804 6th Ave # 3804 1725 3 Br/2 Ba Condo
11/07/2012 599,000 520,000 521 74th St 1625 100x110 3 Br/2 Ba SFR 11/07/2012 449,000 443,000 5805 De Palmas Ave 1150 50x101 2 Br/2 Ba SFR
11/16/2012 335,000 305,000 205 Peacock Ln 1653 43x87 4 Br/3 Ba SFR
11/16/2012 499,000 475,000 211 71st St 1344 54x105 2 Br/2 Ba SFR
11/16/2012 489,000 480,000 309 59th St # B 2083 3 Ba/2 Ba SFR 11/20/2012 859,000 790,000 520 Key Royale Dr 3720 100x108 5 Ba/2.5 Ba SFR 11/21/2012 449,000 445,000 5802 Imperiore Ave 1200 48x101 3 Ba/2 Ba SFR 11/23/2012 419,000 398,600 5704 Holmes Blvd 1678 82x117 2 Br/2 Ba SFR 11/26/2012 439,000 430,000 205 77th St # A 900 2 Br/2 Ba SFR
11/29/2012 400,000 415,000 116 81st St 1494 68x80 3 Ba/2 Ba SFR 11/29/2012 585,000 570,000 603 Dundee Ln 1920 3 Ba/2 Ba SFR 11/30/2012 450,000 425,000 312 57th St 1665 3 Ba/2,5 Ba SFR 11/30/2012 469,000 460,000 212 81st St # B 1200 90x90 3 Ba/2 Ba SFR
11/08/2012 389,000 369,000 3007 Avenue E # 2 756 100x105 2 Br/1 Ba Villa 11/08/2012 375,000 375,000 202 64th St # A 1481 67x100 2 Br/2 Ba Inc. 11/09/2012 350,000 320,000 302 60th St 101x107 Vac.

Source: Manatee County Property Appraiser’s Office


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