The Senate just passed, and the President is ready to sign, the Financial Regulation (FinReg) Bill, which will signficantly impact home buyers and lending guidelines. Amongst the changes impacting consumers is the creation a Consumer Bureau at the Federal Reserve and the requirement that lenders ensure a borrower is able to repay a home loan by verifying income, employment, and credit history. To read the full story, please click here …. KEEP THIS IN MIND: Under the financial regulation bill, at least two (2) categories of mortgages likely will see a dramatic decrease in their availability:

• 1st: Interest-only loans and stated-income loans. Both loan types likely would fall short of the government’s definition of “qualified” mortgages and therefore be avoided by many in the lending community.
• 2nd: Yield Spread Premiums.The bill also severely limits the industry practice known as “yield spread premiums,” which in many cases incentivized mortgage brokers and loan officers to sell higher-interest loans to borrowers. The reform bill will no longer allow commissions earned by mortgage brokers and loan officers to be linked to the interest rate, but rather the loan amount. Once the bill takes effect, the total commission and additional fees charged by lenders and others in the mortgage process will be limited to a maximum of three-percent (3%) of the loan amount, not including the real estate commission.

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Posted in Financal Regulation, Bankers, Mortgages | One Comment