Tag Archives: mortgage lending

New Rules For Mortgages Less Restrictive

15 May

Federal Regulators seem to be loosening up mortgage lending standards, according to an article in the Wall Street Journal this week.

Federal Housing Finance Agency Director Mel Watt made comments saying Fannie Mae and Freddie Mac should direct their focus toward making more credit available to homeowners—a reversal from previous directives to lessen their footprints in the mortgage market.

Six federal agencies, including the Federal Housing Finance Agency, are expected in the coming weeks to finalize rules for mortgages that are packaged into securities by private investors.

“Those rules largely abandon earlier proposals requiring larger down payments on mortgages in certain types of mortgage-backed securities,” WSJ said.  The rules also represent a shift from previous initiatives that emerged in the wake of the 2008 crisis, which pushed to restrict the the flow of “easy money” that ruled the bubble.

Critics of easing mortgage lending rules now, however, worry that regulators could be paving the way for another boom and bust.

“Do not confuse weakening underwriting standards and underpricing risk with helping people or promoting market efficiency,” said former FHFA Director Ed DeMarco in a speech this week during a banking conference in Charlotte, North Carolina.

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9 Apr

Dodd-Frank Regulations Pose a ‘Serious Challenge’

From DSNews April 8, 2014

The latest version of the Dodd-Frank mortgage regulations has bankers worried about lending, and their fear has already affected who can qualify for mortgage loans.

On Monday, the American Bankers Association [1] (ABA) released the results of its latest annual Real Estate Lending Survey [2], which clearly show signs of caution among loan officers. According to the ABA, more than 80 percent of bankers surveyed believe that tightened Dodd-Frank rules will restrict credit, thereby narrowing the pool of candidates able to secure mortgages.

In January, the Consumer Finance Protection Bureau implemented Regulation Z [3], which prohibits lenders from making a higher-priced mortgage loan without regard to the consumer’s ability to pay it back. This change swiftly led lenders to alter who they saw as viable mortgage loan candidates as they figure out how to do business within the confines of tighter controls.

“The new mortgage rules are a serious challenge, especially in the near term, for mortgage lending,” said Robert Davis, EVP of the American Bankers Association. “The problem will last at least as long as bankers calibrate their compliance systems, and perhaps much longer.”

According to the ABA, more than a third of bankers surveyed said they would only offer qualified mortgages. Another third said they would offer non-qualified mortgages, but only to targeted customers. A full 95 percent of those who say they will offer non-QMs plan to hold the loan as a portfolio investment. Five percent say they would sell the loan to secondary market investors.

More than anything, bankers are concerned with the increasing burden of ever-tightening regulation and with meeting the cost of compliance, which has yet to be assessed. It should be noted, however, that three-quarters of the organizations surveyed were financial institutions with less than $1 billion in assets.

Still, not all news is bad. Despite the worries, the ABA survey shows an uptick in the percentage of single-family mortgage loans made to first-time home buyers, from 11 to 13, last year. This is the highest percentage since 2007. Also, 30-year fixed-rate mortgages made up half of all mortgages in 2013, and the purchase market increased from 39 to 44 percent of mortgage originations.

Also, despite concerns, only 11 percent of institutions surveyed say they are contemplating selling servicing rights due to new regulatory requirements or capital treatment of mortgage servicing rights.

 

URL to article: http://dsnews.com/dodd-frank-regulations-pose-serious-challenge/