On January 10, the Consumer Financial Protection Bureau (CFPB) implemented new lending rules meant to protect consumers from risky lending practices. Although some are worried that the new regulations will have an adverse effect on the housing market, most experts believe the new rules won’t have an impact on whether or not prospective buyers will be able to get loans. “They want to make sure lenders are giving loans to borrowers who can afford to pay back those loans,” explained David Neylan, a vice president at Guild Mortgage.
That being said, if you’re in the market for a new house, it would be a good idea to keep yourself educated about your mortgage options. At Greater Good Realty, we can help. To find out more, give us a call at 619-GREATER (473-2837) or visit greatergoodrealty.com.
Qualified mortgages are loans that meet new, stricter guidelines, where consumers are expected to meet ability-to-repay requirements. These types of mortgages contain more protections for the lender, who has the ability to file a lawsuit if the loan isn’t repaid. Listed below are some of the requirements for qualified mortgages.
- The terms of a qualified mortgage cannot exceed 30 years.
- The mortgage cannot charge more than 3% in upfront points and cannot have fees that total more than $100,000.
- Qualified mortgages cannot contain balloon payments or push a borrower’s debt load to above 43% of their monthly income. However, if the loan is eligible to be backed by Fannie Mac, Freddie Mac, or a federal housing agency, the debt load can be higher.
While qualified mortgages do offer enhanced protections, lenders can still use loans that fit outside the CFPB’s new rules. It is important to keep in mind that lenders who choose to forgo these new restrictions will not have the same “safe-harbor” protections offered by qualified mortgages. “You get all of the remedies for a regular foreclosure,” explained Mark Goldman, a loan officer and real estate lecturer at San Diego State University. “If the loan is qualified, there’s less risk for the lender.”
Considering that most lenders already tightened their lending standards following the financial crisis, these new regulations should not make it any harder for people to get mortgages. According to the Consumer Financial Protection Bureau, about 92% of the loans being made today already meet qualified mortgage requirements.
Housing market continues to level off:
According to a recent report from the S&P / Case Shiller Home Price Index, the average price for a home in San Diego was nearly flat from October to November. Although prices were up quite a bit from last year, 18.7%, the monthly increase was just 0.04%. From September to October, prices rose 0.3%, and from August to September, they were up 0.9%. The last time home prices in San Diego fell was in January of 2013, when they dropped 1.03% from December.
For many experts, the slow growth in home prices has a lot to do with the season. David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, said that prices typically weaken during the winter months and, despite the small decline, November’s performance was actually the best it’s been since 2005. According to DataQuick, the median price for a home in San Diego was $415,000 in November and $420,000 in December.
Even though the monthly gains in San Diego have begun to shrink, all signs point to a stable 2014. “The market’s leveling off,” explained Mark Goldman. “Prices had gone too high, then in 2008 they went too low so they recovered from that. Now we’re back to where they ought to be. We’re on the trend line.”