The year 2014 brought more than a blanket of ice and snow to the country! It brought some new Mortgage Rules that are part of the Dodd-Frank Financial Reform Law passed back in July of 2010. The Rules that came into effect on January 10, 2014 are referred to as the Qualified Mortgage (QM) and Ability to Repay (ATR) rules.
A major change due to the new QM rules is the 43% maximum Debt to Income Ratio if the loan doesn’t receive an approval in the Automated Underwriting Systems for Fannie Mae or Freddie Mac. A borrower making $4,000 per month who receives an approval in Desktop Underwriter – the Automated Underwriting System for Fannie Mae – could qualify with a Debt to Income Ratio as high as 50%. This same borrower would qualify for $56,000 LESS if they don’t receive an approval and are limited to the 43% DTI under QM based on current interest rates.
So here’s the Good and the Bad of the latest Financial Reform Rules that took effect Jan. 2014! (more…)