Today, they unveiled the “ability-to-repay requirement,” tied to the Dodd-Frank bill, which can be met in four different ways.
First, a bank or mortgage lender can meet the requirement by considering and verifying eight underwriting factors, including:
– income and assets
– current employment status
– monthly mortgage payment
– monthly payment on any simultaneous mortgage
– monthly payment for mortgage-related obligations
– current debt obligations
– debt-to-income ratio
– credit history
The second option allows a creditor to originate a so-called “qualified mortgage,” which provides the lender with special protections from liability.
Additionally, each would limit mortgage points and fees to three percent of the loan amount, while verifying income and assets.
Option three allows a balloon-payment qualified mortgage if the creditor operates in a predominantly rural or underserved area.
Finally, option four allows for the refinancing of a non-standard mortgage into a “standard mortgage,” which has limits on loan fees and doesn’t contain any risky features such as negative amortization or interest-only features.
The proposal also prohibits prepayment penalties unless the mortgage is a prime, fixed-rate qualified mortgage.
While the rules aren’t yet finalized, it’s going to get a lot more difficult qualifying for a mortgage…