Mortgage Guidelines Loosening

Mortgage Regulations Easing?

Mortgage Regulations Easing?

The mortgage product regulation pendulum has swayed side to side in recent years.  The sway has been primarily influenced by tougher and tighter restrictions with spotted swings toward easement.  The one phrase almost all those inside the lending and real estate industry have uttered over the years is “the pendulum will swing back and land somewhere in the middle.”

Well, we may start witnessing some easement coming from Fannie and Freddie if the rumor mill is spinning truthfully.  Those way up top the mortgage ladder rubbed elbows at the MBA’s annual convention in Las Vegas last week.  FHFA Director Mel Watt, Fannie Mae CEO Timothy Mayopoulus and US Dept. of HUD Director Julian Castro all spoke about new initiatives in the works at the annual event.

Cleaning Up Repurchase Requirements – HUGE Impact

One of THE leading sources of frustration and challenge in today’s mortgage world are the “reps and warrants” or repurchase agreements originating home loan lenders have in place with end investors.  Specifically, there is quite a bit of uncertainty within the actual terms of these types of agreements.  Uncertainty about what makes a lender have to buy back a mortgage loan they originated causes lenders/underwriters to tighten up and over analyze new loan applications.  Ultimately, it makes getting a home mortgage harder for many Americans.

Reps and warrants have also been too severe.  So severe that lenders oftentimes are essentially frightened away from lending in certain cases and with certain products due to the potentially harmful consequences.  I have personally seen loan products roll out from the investor level only to see the originating community (lenders that actually originate mortgage loans) refuse to roll the products out.   HUD/FHA’s Back to Work program is a prime example.  Initially, there were some very vague requirements issued by HUD and as a result it took several months for lenders to feel comfortable originating FHA Back to Work loans.

Lower Down Payment Options coming (maybe)

Recently Fannie Mae scaled back from it’s 3% down program and is currently requiring 5% as a minimum down payment.  A u-turn may be in the future for Fannie Mae’s minimum down payment requirement (and possibly other recent Fannie changes).  Talk about re-introducing a 3% down Conventional loan product was amongst the most interesting of topics last week in Vegas.

Why Ease Mortgage Requirements Now?

The housing market has improved – hard to argue that fact.  However, it is not continually improving at the pace many regulators want.  One of the things that the powers that be believe is at the heart of a slower than preferred housing market is a lending industry that is wound far too tightly with too few being able to gain access to it.  To end where we started – this could be the beginning of the eventual swing to a healthy middle ground we have all been predicting … or better yet … hoping for.

By Jeremy House

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Jeremy is the Founder of The HOUSE Team and a Sr. Loan Officer/Branch Manager with PrimeLending. Over the past several years he has ranked in the top 1% of all loan officers nationwide and one of the top 200 loan officers in America. In the mortgage industry, the devil is in the details. Jeremy prides himself on being a student and an expert when it comes to everything mortgage related.

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