Some very important mortgage news has come about since we flipped the calendar to January. Check out the finer points:
A few weeks ago we heard about changes Fannie Mae and Freddie Mac were making to Loan Level pricing adjustments. Potential home owners without a big down payment and perfect credit would be paying quite a bit more on conventional loans. It’s now official: Mel Watt, the new FHFA Director, has now directed the GSEs (Fannie/Freddie) to delay implementation of the G fee and Loan Level Price Adjustments (LLPAs) changes. A review is pending to determine the effect on availability of credit. Without the delay, rates would have gone up 0.5% – 0.75% for most borrowers as a result.
FHA lowered the max loan amounts in some areas, but for those in Dallas, Tarrant, Collin, and Denton Counties, max amounts have gone up! It’s now $287,500, so you can be looking for homes up to $298,000. Minimum down payments on FHA loans is 3.5% of the sales price and can be gifted from a family member.
Tapering has Begun. Every month, our government has been putting 85 billion dollars into mortgage backed securities and bonds to artificially keep interest rates low along with the hope of improving the housing market. Now that it’s looking better, the tapering of that amount has started, with the first step being 10 billion less per month, which will gradually go down over time. Soon the artificial influence of keeping interest rates down will, of course, taper. Interest rates will go up as a result.
QM (Qualified Mortgage), QRM (Qualified Residential Mortgage) and ATR (Ability To Repay) goes into effect at midnight on the 10th of January. You can expect an all-new underwriting framework for residential mortgage lending. Investors may end up suddenly adjusting based on these new rules. How it will turn out is up in the air. Be very aware of possible sudden changes coming VERY SOON!