Future cloudy for less than 20% Down Mortgages!
http://www.billgemmill.com/blog/articles/27/1/Future-cloudy-for-less-than-20-Down-Mortgages/Page1.html
Bill Gemmill
REALTORRealtor
By Bill Gemmill
Published on 05/22/2011
The proposed rule would also limit the mortgage payment to 28% of gross income and limit all debt to 36%.
No credit score requirement is included, but a mortgage loan would qualify as a QRM only if the borrower is not currently 30 or more days past due on any debt obligation.
The rule would require an 80% LTV, which requires a 20% down payment (even more for a
Borrowers could not have been 60 or more days past due on any debt obligation within the preceding 24 months.
Borrowers could not have, within the preceding 36 months, been through bankruptcy, been foreclosed on, engaged in a short sale or deed-in-lieu of foreclosure, or been subject to a Federal or State judgment for collection of any unpaid debt
While non QRM mortgages might become available, they will certainly come at an increased interest rate, because the issuer (or seciritizer) will be forced to keep 5% of the value on its books for the life of the mortgage, thus losing the ability to leverage that amount and earning income on it. This lost income must be offset by an increase in the interest rate of the underlying mortgage, which will, of course, be paid by the borrower. In essence, the proposed regulations would penalize qualified, low risk borrowers who do not have or who are unwilling to part with the large down payment.
Can you afford a 20% down payment on a home? Do you want to tie up that much cash if you do? A provision of the Dodd-Frank Act includes qualifying residential mortgage, or QRM, and the Act left it up to a number of Federal Agencies to come up with the actual regulations by April 21st of this year.
The proposed rules that have come out so far are these:
The importance of this rule is very simple....it will determine what kinds of mortgages are available to home buyers over the next few years. At this point in the housing "non-recovery", do we want a new rule that will make it harder for buyers to buy a home? Under the proposed rules, the typical buyer will take 14 years to save enough money to come up with a down payment on a median-priced home based on NAR research.