The Importance of the New Dodd Frank Mortgage Guidelines

December 11, 2013 Marc Edelstein FHA mortgages in Michigan, First Time Home Buyers, Michigan Mortgage Banker, Michigan Mortgage Lender, Mortgage News, Oakland County Mortgage Banker, Wayne County Mortgage Banker 0 Comments

The Importance of the New Dodd Frank Mortgage GuidelinesThere is a lot of buzz relating to the new Dodd Frank mortgage guidelines which go into effect on January 10th. I have noticed an increasing number of on-air personalities have been discussing it on TV, and most of this discussion is in mortgage jargon. I think these changes can have a staggering impact upon anyone looking to buy a new house, so I have decided to write a miniseries which discusses the new regulations and their impact upon potential buyers.

The new Dodd Frank regulations, which come into effect next month, have two major components: the implementation of rules regarding a borrower’s ability to repay, making the mortgage a “qualified mortgage;” and new requirements around what percent of a loan portfolio a bank needs to keep and how much of the money being lent month to month needs to be held in reserve by the lending institution.

The first piece of this, the “qualified mortgage” piece, sets minimum guidelines surrounding a borrower’s ability to repay a loan. So where there used to be some wiggle room at the top end of a borrowers budget, that wiggle room has been eliminated. If a lender writes a loan that does not meet these new guidelines specifically, and that person defaults on the loan, the lender could potentially face criminal charges.

The second piece, which has to do with banks holding back reserves in larger amounts based upon the loans they write, means it could become more difficult for larger banks to write large numbers of loans. Because of this, smaller regional lenders are poised to have a more active role in the lending arena next year.

If you have any questions about the Dodd Frank guidelines and how they impact you, please contact me. And if you have anything to add about the new regulatory changes, please leave a comment.

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