From Kyle Shaw at Countrywide Mortgage: Dodd-Frank’s Impact: Ability to Pay and Qualified Mortgages The Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly known as Dodd-Frank) was passed in 2010 as a response to the economic recession. Dodd-Frank made significant changes to financial regulations. Specific restrictions on compensation were introduced to protect consumers from being guided toward certain types of loans simply because the originator will earn more from those loans. Also under Dodd-Frank, a requirement that lenders verify a borrower’s ability to repay a loan has taken effect. The intention of this regulation is to prevent another recession, aggravated by another collapse in the housing market; however, because of new restrictions and requirements, it could ultimately result in more difficulty for the average family to qualify for a home mortgage. One of the standards being implemented is a cap of 43 percent on a borrower’s debt-to-income ratio. That’s up from the previously recommended ratio of about 36 percent. In addition, the federal Department of Housing and Urban Development (HUD) will now only guarantee “qualified mortgages”: loans that are very straightforward and secure. No-doc loans and other riskier loans are not considered qualified mortgages and are no longer salable on the secondary market to federal institutions.
Posted on: Thu, 06 Mar 2014 23:52:03 +0000