With “a lot of exciting changes going on in the mortgage industry,” local expert Mike Goblet of United Mortgage and Financial Group discusses what to expect in 2014 in this edition of Arizona Mortgage News.
From qualified mortgages resulting from the Dodd‑Frank Bill of 2010 and who will be affected, to loan level adjustments, rate increases and a higher focus on high FICO scores, Mike addresses the big changes on the horizon in the upcoming year.
Learn all this and more in this informative video, or contact United Mortgage at 480‑503‑3533, or visitwww.unitedmortgagefinancial.com.
Matt O’Brien: OK welcome back to another segment of Arizona Mortgage News insider update. We have our resident expert Mike Goblet of the United Mortgage and Financial Group and Mike has some very interesting ‑‑ I’d almost think it is a little bit shocking ‑‑ news of when we rolled over from 2013 to 2014, things changed in the mortgage world. Mike good to see you this year.
Mike Goblet: Good morning and a happy New Year to you, yeah. We are into a new year and a lot of exciting changes going on in the mortgage industry.
Matt: Well enlighten us, I am sure it’s going to be fun and a little bit scary.
Mike: Yes it will be both of those things. The biggest new term that you’ll hear in the mortgage industry for 2014 will be what is called a qualified mortgage. This has come about as a result of the Dodd‑Frank Bill in 2010 and is defined by the Consumer Financial Bureau that was created by the Dodd‑Frank bill. It is designed to stop, or to do things with the lending industry and to make sure we don’t go through the same mortgage meltdown, and to control the banks etc.
Matt: Makes sense.
Mike: Yeah, it makes sense, and you don’t know it will be good in many ways but it will also have unintended consequences that aren’t always so good. It was designed to do good things, but will also have some negative impact.
So let’s start out with the qualified mortgage and it really breaks down into three parts, two of them don’t directly affect their consumer and they are called the ability to repay and then a definition of what a qualified mortgage is and is called the qualified residential mortgage.
Those are the things that banks and institutions will be aware of and won’t indirectly affect the consumer. The big item is what you call the debt to income ratio. Under the new qualified mortgage and the internal mortgages that will be sold to Fannie or Freddy, which is the majority of loans ever sold, will have a maximum debt to income ratio of 43 percent. That means the total indebtedness added to the 43 percent where it becomes an unqualified mortgage that will have different consequences and fall into a different product.
Matt: What was it at prior to this?
Mike: Well, it’s interesting. Technically it was supposed to have been about 45 percent, but as long as you’ve got automated underwrite approval, which would look at other things, we would give some clients as high as 50 percent debt ratio, this way we’re talking about seven percent. Now it’s going to depend on the housing industry and people qualifying for it.
Let me give you an example from the public and that is self‑employed people, people who have a lot of tax write offs, and have good accountants that control their income that way for tax purposes, and actually lower income people with some debt, and seniors who are on fixed incomes and really can’t get above them. These people are going to potentially be eliminated from a mortgage or be forced to look at significantly higher rates for an unqualified loan.
Matt: Interesting.
Mike: Yeah, it is. Some banks are looking at not even doing them as a result of the consequences that they have, and so competition may be less in terms of the changes as well, which again gets affected by the consequences.
Matt: I see.
Mike: There are other things coming too that consumers should be aware of. Coming down, which is supposed to be in April, there are what will be called loan level adjustments that banks will be forced to do that are going to increase rates as well and put a higher focus on high FICO scores. Not the current 740 as a max, but even get involved to 800 credits required depending upon the amount of money you take out. This will affect…I’m sorry?
Matt: Well, big time. That’s going to tighten up the amount of capable people out there that can mortgage their house.
Mike: Both of these things will have an impact. Both in terms of people qualifying, and the rates, of course. The other big change that came down was with the FHA loans. They have a new Phoenix limit of $271,050. This is down $75,000 in their limit from the previous $346,250. That will have a dramatic impact on people who qualify for FHA loans that now won’t qualify for many of the houses they want under an FHA.
Matt O’Brien: It seems odd, because the housing market seems to be appreciating, and now they’re making a major adjustment.
Mike: You are correct, but part of their viewpoint is twofold. Number one, to protect themselves against higher defaults and more money at loss. They also submit to market averages, and when the Phoenix market was moving so quick in the 2000s, 6, 7, and 8, the average price of a home skyrocketed. The loan model went to the 346. The average price has come down, so they’ve lowered it. It will impact the housing market and they’ve been wanting to say that to all the people they now have to eliminate, because the house is too expensive for an FHA loan.
Matt: Lots of fun changes. What else do you have there?
Mike: Well, I’ll get into other blogs coming up quickly here about the rate changes that are coming for 2014, and also the housing market ‑‑ what to expect and how that will impact potential buyers and sellers and the law. But to 2014, I can tell you, my best advice to consumers would be to act boldly and act quickly. The changes are coming, they’re going to continue to get tougher, and it’s only going to get harder as we move forward in 2014, not better.
Matt: Isn’t the deadline for all these changes getting under the wire tomorrow?
Mike: Well, January 10 is for the qualified mortgage. FHA went into effect on January 1st. I had mentioned that in a prior blog, but it’s good to repeat it. They’re coming now. Some of the other is scheduled for April, but still under review. The changes are going to keep coming; in fact, there’s a lot of talk that they’re going to change the MI again on an FHA and increase it, but there’s nothing specific on that. It’s just coming.
Matt: So act now before you are going to be regretting your indecision.
Mike: It is the best strategy you could employ right now, because everything’s only going to go higher and get more costly.
Matt: Makes sense. This certainly seems to put United Mortgage in a good situation with probably fewer mortgage companies out there and putting more control back in the bank. You really need a company like United Mortgage on your side to sift through all these changes.
Mike: I would certainly like to think that that’s true. The fact that we have about 10 or 12 different lenders we can go to, all of which have different guidelines and overlays to put out. Some of them are portfolio vendors. That means they’ll do loans that other lenders won’t do at all. Gives us a strong advantage, I believe, in the marketplace right now.
Matt: Makes sense. Well, these are some pretty exciting changes.
Mike: I look forward to bringing you updates on the changes in rates in the very near future, and like I said, the housing market for January, because there are expectations that will affect buyers and sellers in that as well.
Matt: Mike, lots of questions and lots of things that are probably going to spur some further thoughts. What’s the best way to get in touch with you for those that would like to reach out?
Mike: Well, our office number at United Mortgage Financial Group here is (480) 503‑3533. You can call me on my cell, (480) 220‑2229. Of course, reach me by email at Mike.Goblet, G‑O‑B‑L‑E‑T at,using initials, umfginc.com.
Matt: Excellent. Well, thanks for helping kick off the New Year and giving us a little warning for those that are looking at refinancing or buying a home, it’s time to act before the requirements get a lot tougher, it sounds like.
Mike: Without a doubt. Have a happy new year. I look forward to answering any consumers’ questions, and I look forward to talking to you in the near future.
via:http://www.arizonamortgagenews.com/mortgage-rates/changes-for-mortgages-in-2014/
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