Starting January 10th, 2014, new rules will be instated designed to help make mortgages safer. Unfortunately, these new rules come at a difficult time as fewer homeowners are refinancing and could result in less choice for borrowers. With lending already being complicated, smaller banks may have trouble complying with the new rules that will require any lenders to ensure the monthly mortgage payments are affordable for the buyers. If they fail to ensure, they will end up paying strict penalties.
Previously, banks would issue loans without verifying borrowers income and assets, now they must carefully examine and check pay checks, bank statements, tax returns, and any other paperwork the borrowers provide to ensure the borrower’s ability to repay the loan. Lenders will now have to require the total debt payments for the borrowers does not exceed 43% of their total income. Banks are going to have to update their underwriting policies and procedures, change their technology, and retrain staff.
Although bigger banks can handle the cost, there is concern that some smaller banks may to be able to afford the extra manpower that may be required to comply, Though other experts believe that lenders will find a way to make the rules work despite the size of the lending bank.
Distinctive Properties, Inc.