Columbia SC mortgage lenders are anxiously awaiting revisions to the “Know Before You Owe” mortgage disclosure rules. The Consumer Financial Protection Bureau (CFPB) – acting on a promise made this past April – recently released updates to the rules in response to the mortgage industry’s requests for better clarity on the regulations. However, there are still nagging concerns regarding the secondary market, and those concerns will inevitably affect mortgage lenders’ ability to make loans that may not qualify for sale. Here’s a closer look at Know Before You Owe and what it means to the Columbia SC mortgage market.
Columbia SC Mortgage Lenders See Challenges Ahead?
The Know Before You Owe mortgage disclosure rule (also called the TILA-RESPA Integrated Disclosures rule) went into effect in early October 2015. Almost immediately there were serious concerns about how long it would take to close mortgage loans – causing a domino effect of problems for borrowers whose contracts called for timely closings.
While most of the initial wave of problems have been solved, one remaining issue has continued to plague mortgage lenders. The secondary market – where many lenders package and sell their mortgage loan investments to third-party investors, including government entities like Fannie Mae and Freddie Mac – is still experiencing issues with TILA-RESPA. In addition to the addressed changes to the rules below, the industry, at least for the time being, will be required to follow the original intent the CFPB issued saying, “examiners will be squarely focused on whether companies have made good faith efforts to come into compliance with the rule.”
The changes made by the CFPB include the following:
Tolerances for the total of payments. Prior to the enactment of the Know Before you Owe mortgage disclosure rule, the total of payments calculation and disclosure was arrived at by using the finance charge as part of the equation. The rule amended the total of payments calculation so that it didn’t make specific use of the finance charge. The CFPB now proposes to add tolerance provisions for the total of payments that are similar to tolerances in place for the finance charge and all disclosures affected by the finance charge.
The result? The change makes the treatment and disclosure of the total of payments consistent with how it was shown before the Know Before You Owe mortgage disclosure rule was enacted.
Housing assistance lending. The initial rule allowed a partial exemption from the disclosure requirements to some housing assistance loans that were originated primarily by housing finance agencies. The CFPB issued an update that would promote housing assistance lending by stating that certain recording fees and transfer taxes can be charged as a result of transactions while ensuring the partial exemption eligibility would still be in place.
The result? More housing assistance loans will likely qualify for the partial exemption. That, in turn, will probably encourage mortgage lenders to work more closely with housing finance agencies to fund these type loans.
Cooperatives. The CFPB proposes to have the rule’s coverage include all cooperative (co-op) units. In a cooperative, the purchaser becomes a shareholder in the corporation that owns the property. The buyer, by virtue of being a shareholder, is allowed exclusive use of a housing unit in that property. As it stands now, the disclosure rule covers only those transactions secured by real property. Real property is defined in individual states’ laws. As such, cooperatives are sometimes considered personal property and sometimes considered real property.
The result? The CFPB plans to simplify compliance by including all cooperatives in the disclosure rule.
Sharing information and privacy. The existing disclosure rule requires that creditors provide mortgage disclosures to the consumer. The CFPB has come under criticism and has received numerous questions regarding sharing the consumer disclosures with third parties to the transaction – including real estate brokers and sellers. The CFPB has decided it’s appropriate for creditors and others involved in the transaction to receive the closing disclosure.
The result? The CFPB is working on a separate disclosure form to the consumer and the seller to rectify what has been deemed a problem.
Columbia SC mortgage lenders in conjunction with the Mortgage Bankers Association (MBA) have expressed their appreciation in the CFPB’s efforts to update various parts of Know Before You Owe. MBA president and CEO David Stevens said the “regulation has a big impact on both borrowers and lenders, so it’s important that the Bureau and stakeholders continually reassess the implementation process to ensure its effectiveness. We look forward to commenting on the rule, and continuing to work with the CFPB to gain further clarity in order to improve this and other rules and regulations.”
In addition, the National Association of Federal Credit Unions (NAFCU), while appreciative of the DFPB revisiting the disclosure rule, remains concerned that the changes may not be as far reaching as they need to be. The NAFCU feels the CFPB hasn’t fully addressed the many compliance issues expressed by credit unions.
The CFPB has encouraged a wide range of input from its stakeholders – including Columbia SC mortgage lenders – and has invited public input on their proposal. Comments and information submissions are due in mid-October and will be thoroughly considered prior to final regulations issued.
What this may ultimately mean to the mortgage lending industry is this. In the absence of greater clarification on issues that are pertinent to the entities to which lenders sell their mortgage originations on the secondary market, some lenders will either choose to limit the number of loans they sell, or restrict their lending activity to only those loans that are easily marketable. Examples would be loans with lower LTV ratios or loans made to borrowers with excellent credit scores and high net worths.
However, most Columbia SC mortgage lenders remain confident the changes the CFPB will be sufficient enough to solve the nagging questions that currently remain regarding the secondary market. If that is indeed the case, the mortgage market will likely not be adversely affected.
You can find more articles pertaining to Columbia SC mortgage lenders and the mortgage market in the Columbia SC Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
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The Columbia SC mortgage market is abuzz with talk about refinancing. With 30-year fixed rates approaching all-time historical lows many economists say this could be the best time ever to refinance your mortgage – even if it’s only a few years old with what was a great interest rate at the time. Recent turmoil over Great Britain’s departure from the European Union caused stock markets around the globe to nosedive. When the stock market is weak, interest rates generally stay low. As one analyst put it, “Financial turmoil can be awfully good for mortgage rates.” Let’s examine why it may be a good time to refinance and where Columbia SC mortgage rates may go from here.
Columbia SC Mortgage Activity: It’s All About Refis
Uncertainty in the market is causing investors to sell off their riskier global stocks in favor of safer U.S. mortgage bonds. Mortgage bonds are considered among the the most secure in the world market because they’re made up of home loans made in the U.S. following the most stringent guidelines in decades. When the bond prices go up, the bond yields or rates go down. When this occurs, it’s usually a good time to take a look at your mortgage and consider refinancing.
As an example, just a slight rate decrease of .25% would decrease your monthly payment by $42 on a $300,0000 mortgage.
While Columbia SC mortgage interest rates have been low for several years, many homeowners have recently gained a great deal of home equity, thanks to fast-rising home values. Not only are they eligible to refinance, but they may choose to access some of their new-found equity. The mortgage market may very well have a refinance boom similar to that from 2008-2014, when roughly 25 million borrowers refinanced their mortgages, according to a new report from the Urban Institute.
If you’re thinking of refinancing – and we think you should be – here are a few tips we recommend.
Make sure your mortgage lender is quoting you the correct rate. Rate quotes are dependent on your loan closing and finalizing in a certain number of days. If you need a longer rate lock period you’ll likely pay a higher interest rate. Should you find a rate quote that’s lower as you’re shopping around, ask the lender about their rate lock time period. Make sure they are able to close your loan within that timeframe.
Confirm the timing. As more people elect to refinance, Columbia SC mortgage lenders will get very busy. Ask your lender for confirmation that they’re giving you a rate quote that gives them enough time to close your refinanced mortgage. If they can’t do that, find another lender.
Remember your second mortgage (if you have one.) If you have a second mortgage on your home – even if it’s a Home Equity Line of Credit (HELOC) – the second mortgagee has to agree to the terms of the new first mortgage before you can close the refinance.
Prepare your documentation again. It may sound crazy, but even if you’re refinancing with your existing lender, the federal regulations require them to verify and update employment, income, asset and debt information all over again. So be prepared to go through pretty much the same process you did when you took our the previous mortgage loan.
What About Columbia SC Mortgage Costs?
You should make a point to discuss the break even point of refinancing with your Columbia SC mortgage lender. Refinancing usually costs between $2,000 – $4,000 depending on your market and the lender you choose. Typically, interest cost savings as a result of a refi should mean your break even point would be sometime between 2-3 years. Another tip to remember: a “no cost” refinance isn’t really free of any costs. The borrower is being given a slightly higher rate in order for your lender to, in effect, finance the closing costs. Ask your lender to help you with cost comparison analyses to find out what your costs are compared to what your interest rate savings will be. If you’re planning to sell your home sooner than the 2-3 year average break even period, you may want to rethink your refinancing plans.
Although yields on the 10-year Treasury bonds – which Columbia SC mortgage interest rates follow somewhat – will need to remain low for a while before mortgage rates drop markedly lower, it’s definitely worth watching rate activity and planning for a potential refinance.
Whether you ultimately elect to refinance your current mortgage or not, mortgage experts suggest you weigh your options carefully. If rates do continue to drop, they could possibly drop even more. Decide what rate you can best be satisfied with. Many times in falling rate markets, prospective borrowers keep waiting and waiting for rates to go lower. Then, when they begin to rise, an unprepared borrower may actually end up paying slightly more than he could have if he had acted quicker. Our suggestion: don’t be greedy. If you like the new interest rates once they fall – if they do – then refinance. If you’ve done your homework, you’ll still save money in the long run.
You can find more articles pertaining to the Columbia SC mortgage market in the Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
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The Columbia SC mortgage market remembers – as do we all – the U.S. housing crash of less than a decade ago. One of the hallmarks of the crash was mortgage lenders who required little or no supporting documentation. When the housing market was booming, they were called “stated income” loans and were advertised as “low-doc” or “no-doc” loans. After the dust settled and the ashes cooled, they were named “liar loans.” That time in American financial history was notable because it represented a reckless, irresponsible precedent that none of us hope repeats itself. Lenders and borrowers alike could essentially put anything they so desired on the mortgage lending application to close the deal. Now, one bank is offering a loan product that brings back memories — most of them bad.
Columbia SC Mortgage Market – What’s up with Docs?
An FDIC-insured community bank in New York City has recently unveiled a new loan program known as “Lite Doc.” The program requires verification of the borrower’s employment and two months of bank statements. For borrowers that are self-employed, the bank requires documentation of just one year of the P&L, profit and loss statement. By comparison, most mortgage loan applications currently require two years of Form 1040 income tax statements, two years of employment W-2s and a minimum of four pay stubs. In addition, they require bank statements and credit reports.
The Lite Doc loans, offered by New York based Quontic Bank with offices in New York City and Miami, are not required to comply with the stringent new “ATR” rules, or “ability to repay” requirements established in the aftermath of the housing crash as part of the Dodd-Frank legislation. Why? Because of a new loophole that allows the bank an “out.” Quontic Bank has been designated as a community development financial institution, or CDFI, by a U.S. Treasury program designed to provide funds to revitalize low-income communities.
According to the Treasury website, “The fund,” established in 1994, “serves mission-driven financial institutions that take a market-based approach to supporting economically disadvantaged communities." Quontic qualifies since it makes loans to borrowers in a low-income community, Queens, New York. In addition, CDFI lenders enjoy exemption from compliance with the “ability to repay” rules.
To be fair, the “Lite Doc” loans aren’t exactly the “low-doc” loans of the early 2000s. Lite Docs require a 40% down payment and a minimum FICO credit score of 700. In addition, the borrowers must be able to substantiate that they have a minimum of 12 months of principal, interest, taxes and insurance (PITI) in the bank at the time of loan closing. Lastly, Lite Doc loans are only made for the purchase of owner-occupied primary residences.
A Quontic spokesperson said a large number of the bank’s customers are immigrants comprised of half-dozen or more family members who pool their money to meet the required down payment. They don’t have the normal or traditional income documentation available to them that other borrowers may have, because many are paid in tips and bonuses.
While Quontic Bank is able to make Lite Doc loans to anybody in any city in America, so far they have chosen not to do so. The Quontic program is only a few months old and the bank has made just seven Lite Doc loans to customers in New York and Miami. There are others in various stages of processing, the spokesperson says.
An attorney who specializes in consumer financial services issues had this to say about the CDFI banks. "The CDFIs get this privileged status because their sole purpose is to help consumers. They don't have a traditional profit motive. The concern about steering borrowers into inappropriate loans isn't there.”
However, the attorney admits, while the Lite Doc product may not be a “prudent loan,” it is not an illegal loan. And if there’s no strict verification of income, there’s always the possibility that borrowers will falsify or overstate it.
Banking insiders contend lending programs like Lite Doc can be successful, but only if the underwriting guidelines are adhered to and aren’t relaxed. In addition, they warn, the lending documentation that is gathered needs to be accurate because federal regulators will examine the loans on a regular basis.
So what, if anything, does this new product mean to the Columbia SC mortgage market? Maybe nothing… but it’s worth keeping an eye on. In the last decade the mortgage lending business has implemented stricter underwriting rules – frankly, because of the billions of dollars in legal settlements they were ordered to pay as a result of their reckless lending practices.
While some in the Columbia SC mortgage market will argue that credit restrictions have been overcorrected in an effort not to repeat the financial sins of the past, others feel lending standards should be more relaxed. No doubt a happy medium is required to further stimulate home ownership, which is at an all-time low. However, we've seen the results of families borrowing more than they can afford to repay. Millions of Americans endured the pain of foreclosure brought on, in part, by irresponsible lending practices in combination with a recessionary economy. Here's hoping the Columbia SC mortgage market will never experience those misfortunes again.
You can find more articles pertaining to Columbia SC mortgage market in the Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
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The Columbia SC mortgage market probably contains a number of borrowers and prospective borrowers who would be considered affluent. As such, one would assume people who have lots of money, large assets and high net worth would almost automatically qualify them for a jumbo mortgage. If you assumed that, you'd be wrong at least some of the time. Some affluent borrowers still face considerable challenges when it comes to their credit scores. Let's look at how low credit scores can affect even the rich in meeting the qualifications for a mortgage.
Columbia SC Mortgage Market – Credit Affects Us All
The well-known credit reporting agency, Experian, recently released a survey showing that 40% of respondents who earn $100,000 or more still worry their credit score will adversely affect their ability to buy a home this year. In addition, 29% of those surveyed reported they were in the process of improving their credit scores to qualify for better terms on a home mortgage loan. The Experian survey was based on data collected back in February from 500 affluent borrowers or would-be borrowers who recently bought a home or were planning to buy within the next year.
While the average American may find it hard to believe that affluent borrowers – or anybody that earns $100,000 or more annually – could ever have credit problems, credit issues can affect anybody.
Columbia SC mortgage market lenders say the minimum credit score is 720 to get the best jumbo rates and loan terms. Jumbo borrowers with credit scores below 680 are among those who begin facing serious qualification challenges. Some lending institutions may choose to qualify a borrower with a slightly lower credit score under two major conditions. First, the borrower must have income and assets that help offset the lower credit score and, second, if the lender is able to keep the jumbo loan in its in-house lending portfolio. Jumbo mortgages are loans in excess of $417,000 in most markets and $625,500 in select high-priced markets – the limits for the government-backed mortgages.
Ironically, wealthy borrowers often don't even realize they have credit challenges. For example, many affluent borrowers assume their credit scores will remain high if they pay off high balances each month. However, credit reporting agencies also judge the credit management practices of borrowers to ensure they are able to handle credit accounts without becoming financially overwhelmed. In addition, despite their wealth some affluent people just don't worry enough about their credit accounts. While it's a great feeling to know you have credit balances that can probably be paid in full anytime, by not paying attention to payment due dates or late fees, any borrower – regardless of their income or net worth – can run into credit problems that may follow them forever.
An Experian credit specialist said, “It doesn’t matter how much money you have, it really is about how you manage your credit. For the best score, people should limit usage to less than 25% of each entire credit line."
Another problem that often affects affluent borrowers is shared credit obligations. A spouse, for example, who has credit issues that remain unresolved – and unconfessed – can be a proverbial curve ball that can threaten approval of a loan application, not only in the Columbia SC mortgage market, but nationwide as well. If unpaid bills create a problem, that problem can normally be solved by paying the bills in full and using a "rapid re-score" service. Mortgage lenders must request the re-score, which typically costs around $25 per account and can take place in 4-5 days.
New credit-reporting rules that go into affect this summer may also benefit affluent borrowers. The government-sponsored Federal National Mortgage Association (Fannie Mae) buys loans from mortgage lenders and sells them as mortgage-backed securities. They have recently added "trended credit-data reports" as part of their automated underwriting system, to be released into the Columbia SC mortgage market June 25.
Existing credit reports only show the outstanding balances of each account. Therefore, on mortgages, car loans or credit cards the credit report shows what's owed and whether the account holder has made payments on time or late. Under the new system, credit reports using trended data will give the lender more information. While the scoring method itself remains unchanged, the lender is provided with additional data such as the scheduled payment and actual payment amounts over time to better enable lenders to rate how borrowers use credit cards. For example, does the borrower pay the balances in full each month or does he make only the minimum payment?
While the new credit reports from providers TransUnion and Equifax will apply to government-backed mortgage loans, jumbo lenders will probably use them, too. Credit experts say this will give affluent borrowers with high net worths to show their ability to pay despite having high account balances.
You can find more articles pertaining to the Columbia SC mortgage market in the Columbia SC Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
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Columbia SC credit scores are a genuine concern among a growing number of young consumers considering entering the home buying market. First-time home buyers that could potentially exchange their rent payments for equity-building house payments are remaining on the sidelines. They are fearful their credit scores may not be good enough to qualify for a mortgage. The scary thing is, they may be absolutely correct.
Columbia SC Credit Scores Worries First-timers
According to a recent survey prepared by the credit-reporting agency, Experian, roughly a third of future first-time home buyers are worried about their credit scores. They are among an ever increasing percentage of young people who are worried their credit scores won’t be high enough to obtain financing to purchase a home. Nearly 45% of respondents say they’ve put off buying a home until they can improve their credit score. Roughly 20% said they were more likely to decide against pursuing a mortgage loan to buy a home for the next five to ten years.
Credit experts agree that mortgage lending is still relatively tight. In addition, since a credit profile is one of the major factors in securing financing, lender’s continue to use it as an indicator of a borrower's financial health. Therefore, say mortgage lending experts, it’s important for young people with lower credit scores to improve their creditworthiness.
Around 75% of survey respondents said they were working on improving their credit scores. Steps cited include reducing outstanding debt, paying installment bills on time and being more vigilant to protect their credit from identity thieves and fraudsters. Despite these measures, only 30% of homebuyers last month were first-time buyers. This represents a substantial reduction in the historical average of first-time buyers.
According to top economists, qualified first-time home buyers should be more prevalent in the mortgage and home buying markets. With rents rising in nearly all real estate markets and with average interest rates remaining affordably low, the first-time home buying market is ripe for young borrowers.
Let’s examine a few reasons why first-time borrowers are so worried about their credit. In addition, let’s look at how creditworthiness – or the lack thereof – impacts other factors in the home buying arena and Columbia SC credit scores.
Young, prospective home buyers – especially first-time purchasers – have heard for years how important credit history is in obtaining a mortgage loan. Many of them have a limited number of credit accounts and have expressed concerns about qualifying for a home loan. Others have credit card debt or auto debt where monthly payments have been late. Naturally, that history will negatively impact their Columbia SC credit scores.
Student loan debt is another big issue facing a large number of young home buying prospects. When they finished college and finally found a job in what has been a difficult employment market in recent years, student loan debt repayment weighed heavy on many. For the vast majority of these young people, student loan debt represents their largest payment obligation. Some fear adding to that debt will prevent them from meeting the lending criteria required to get a home mortgage.
There are, no doubt, genuine credit concerns among young borrowers contemplating buying a home for the first time. However, there are additional reasons Millennials cite for not yet becoming homeowners. Young people are mobile and transient. They are getting married later, which means they are having families later. Real estate experts say they deal with many more young couples than young singles looking for homes. Simply put, younger people are less likely to put down roots at this stage in their lives.
The job market also has a tremendous influence on not only where but how young prospective home buyers decide to live. For those in entry-level positions or working part-time jobs while pursuing graduate degrees or vocational training, the community in which they now live isn't necessarily where they plan to live in the near future. Committing to a long-term mortgage – especially as a first-time buyer – may seem intimidating to them. They instead rationalize they'd be better off deciding where their new job will be and buying a home in a neighborhood or suburb nearby. Then, they will be more likely to afford the mortgage payments along with the other expenses that go with becoming a home owner.
Ironically, the majority of young people worried about their Columbia SC credit scores – as is the case with most Americans – probably have no idea what their actual score is. They've never checked it. Credit experts recommend prospective borrowers check their credit scores regularly to know where they stand. In addition, they should request a copy of their credit report to ensure accuracy and to make sure there aren't items on the report that don't belong to them.
It's a fairly safe bet the majority of young, first-time home buying prospects haven't checked their credit. So the truth is, they don't know if their credit is good, fair or bad.
Lastly, education and information are two areas in which first-time home buyers are lacking. They are unaware of the various lending programs in the marketplace designed to assist borrowers, especially those purchasing a home for the first time. While lending requirements vary, there are loan products that can help borrowers with lower credit scores or buyers with small down payments. Young people especially need to know this information exists because it can mean the difference between helping them become new home owners or continuing to remain tenants by paying rent.
You can find more articles pertaining to Columbia SC credit scores in the Columbia SC Mortgage Info section of our site below Columbia SC Real Estate Categories in the column to your right.
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