Do your plans for 2014 include a new home? If you’re thinking about signing on the dotted line for a new mortgage this year, it’s important to understand the new federal regulations that go into effect on January 10.
While these new regulations will make it more difficult for some people to get a mortgage, it’s estimated by experts that less than ten percent of people will be negatively affected. Plus, most of the new regulations actually work to the consumer’s benefit!
If you’re a current homeowner or considering a mortgage during the next year, we recommend you visit the Consumer Financial Protection Bureau for more details.
Here’s a quick breakdown of some of the changes going into affect on January 10:
The January 10 update define a new class of mortgages: Qualified Mortgages (QM). These are basically mortgages you’re assumed to be able to repay for many years – rather than just for a few months before interest rates change – if you qualify. Your ability to repay is based on factors like your income, assets, debts and credit history. To receive a QM, you must have a debt-to-income ratio (including the mortgage) of 43 percent or less. To learn more about Qualified Mortgages, visit the Consumer Financial Protection Bureau.
In the past, if you had a problem with your mortgage, lenders weren’t always equipped with the tools necessary to help you. Now, lender companies are required to set up systems that allow their employees to easily access information about your loan, making it easier to help you out if you’re having problems making your payments. Be aware of two key changes:
If you send a complaint in writing, the lender is now required to address the problem within 45 days or explain to you in writing why the problem cannot be fixed. Note: This only works if you write a complaint and send it via snail mail.
Lenders are required to send a monthly statement explaining exactly where your mortgage payment is going each month (i.e. escrow, loan repayment, interest, fees).
If your mortgage payment arrives on time, you’ll get credit for that! The lender can no longer “hold” your payment therefore making it late and charging you a late fee. Note: This is only true if you follow the lender’s exact directions. So if you’re supposed to use a tear-off coupon book, make sure you do that. Otherwise, they can hold your payment for five days, and you’ll have to pay a late fee.
If you fall behind on your mortgage payments, mortgage lenders are now required to have a conversation with you about your options. They are prohibited from starting a foreclosure on a borrower who has issued a formal application for help. There are a number of government programs available that are designed to assist homeowners struggling with their payments. To learn more about your options, visit the U.S. Department of Housing and Urban Development.
Additionally, even if you haven’t asked for help, mortgage lenders cannot initiate foreclosure until 120 days after the payments are delinquent.
While you can legally own a house without having homeowners insurance, most lenders require that you have a policy in your name if you have a mortgage.
If you don’t purchase a policy, or can’t prove that you’ve purchased a policy, the lender has the right to buy a “forced-place” policy in your name and charge you for it. While in the past a lender was able to do this without your knowledge, they’re now required to warn you twice before buying a policy in your name.