OUR GOVERNMENT AT WORK:
Here are excerpts from The National Real Estate Post Video:
The new QM standards for lending are going into effect in January. 20% of the deals funded last year would fail these standards. That’s one in five deals that would not have happened. Any deal with less than a 20% down-payment requires that the lender retain a portion of the loan made so they have “skin in the game”. The smaller community banks can’t tie up the “skin in the game” money so it looks like Wells Fargo, Bank of America, Chase and Citi will be the only lenders doing loans with less than 20% down. Another issue is the impact this will have on the minority and low income populations. The CFPB issued a statement that if lenders fund only QM Safe Harbor loans, they won’t be in violation of anything. So, the National Real Estate Post wonders what will happen when civil rights and Fair Lending groups and organizations bring lawsuits against the lenders? Will their defense be, “but the CFPB said it’s okay”?
SO, JUST WHAT IS THE CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)?
CFPB is a result of the Dodd/Frank legislation. Their primary goal is to educate consumers against abusive practices in the financial services industry; enforce federal consumer financial laws with banks, credit unions and other financial companies; gather and analyze available information to better understand consumers.
WHAT ARE SOME ASPECTS OF FINANCIAL REFORM?
- The maximum debt ratio is 43% and the stated income/stated asset loans are against the law.
- A Qualified Mortgage (QM) is a loan that provides a creditor a layer of legal protection forever.
- Financial Reform applies to all lenders regardless of whether they are financial institutions or not.
Financial Reform requires the creditor to evaluate the “ability to repay” for all primary, secondary, investment, 1st mortgage and HE loans.