New Dodd Frank Quality Mortgage Regulations Impact Homeowner Qualifying Ability and Lender Risk
As of January 10, 2014 the Dodd-Frank Act regulations regarding mortgage lending went into effect. According to this article in American Banker, “Dodd–Frank offers a “safe harbor” from potential ability-to-repay litigation through a “qualified mortgage,” which entails loan limits, fee caps, and prescribed payment calculations, among other constraints. Of particular note is the QM requirement that mortgage payments will not increase the borrower’s debt-to-income ratio above 43%.
Although this ratio falls within the range of industry standards, there is infinite variety among borrowers’ circumstances that bankers could otherwise take into account. The DTI restriction will increase the number of applicants who will be rejected for loans they could afford. Some surveys also indicate that non-QM loans—those that might better serve buyers’ needs—will be difficult to come by.”
It stands to reason that lenders needed to be more accountable for their lending practices, but the Dodd-Frank guidelines further restrict credit policies and add several layers of documentation that can delay loan processes.
The positive spin to this new lending challenge is how these new lending guidelines could support green lending practices. The Federal Housing Administration (FHA) has expanded debt-ratio requirements to include energy operating cost reductions in the qualifying ratios.
Green Energy Money (GEM) and Security NationalMortgage Company (SNMC) are working with Freddie Mac and Fannie Mae agencies to implement and approve expanded debt-to-income ratios for energy efficient and high-performance homes. Qualifying for a net-zero home loan may prove to be easier than qualifying for a conventional home if the expanded debt ratios are allowed.
There may be a silver lining; i.e., this could be a major driver for consumer and lender engagement in high-performance lending. The other good news is that private capital markets may have a way to compete and offer alternative lending programs that allow expanded debt ratios; downside is these loans may charge higher premium rates.
Financing for Green Homes
SNMC is the premier green lender in the U.S. Our loan officers, processors, underwriters offer a diverse line of High Performance Home financing solutions that make it easy to fund new home purchases, new construction projects or retrofit upgrades of existing homes.
In partnership with Green Energy Money (GEM), we facilitate the loan process to include a “green appraisal” that recognizes and quantifies the value of your investment in high-performance measures. GEM’s third-party certification processes and quantified methods support the appraiser in properly valuing and recognizing the lower maintenance costs and reduced operating expenses of an energy-efficient home.
SNMC’s loan options give you the freedom to choose cutting-edge, energy-efficient construction methods.
Call 877-436-3011 or email us today for a no-obligation consultation with one of our qualified loan consultants or loan officers!
Source: SNMC Go Green News
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