How will QM/ATR affect your business?
Back in late October, we began delving into the topics of Qualified Mortgage (QM) and the Ability to Repay (ATR) rules. If you missed the information in our earlier QM/ATR post, go back and check out the informational video from the Consumer Financial Protection Bureau. It gives you a good overall introduction to QM and ATR. In today’s post, we’ll go into a little more detail about how these mortgage rules will affect your business.
Before you get too nervous, don’t worry – ATR isn’t going to be a huge deal. The Ability to Repay rule sounds like common sense, really. After all, who wants to lend money to someone who can’t pay it back? However, ATR was created in an effort to combat the loose credit standards that were more common during the 2004-2005 years. In all likelihood, you won’t see much of a difference once ATR goes into effect because most lenders have long since tightened their credit requirements back to the standard “full doc” world. Under the new ATR, lenders will have to check documentation like W-2s and pay stubs and they will need to consider eight different types of information:
- Borrower’s current income or assets
- Borrower’s current employment status
- Credit history
- Monthly payment for the mortgage
- Borrower’s monthly payments on other mortgage loans obtained at the same time
- Monthly payments for other mortgage-related expenses (such as property taxes, insurance, etc.)
- Borrower’s other debts
- Borrower’s monthly debt payments, including the mortgage, compared to his or her income (debt-to-income ratio). The lender may also look at how much money the borrower will have left over each month after paying his or her debts.
If you’d like to learn more about the QM/ATR rules, the Consumer Financial Protection Bureau recently published a consumer guide called “What the new Ability-to-Repay rule means for consumers.” Download and read it here: Consumer Financial Protection Bureau Guide
Be sure to check back with us, as we’ll be going over the QM rule in more detail, too.
Mortgage Rate Forecast
Currently Trending: HIGHER
The first week of November saw rates fall an average of .125%, depending on the lender, as we saw MBS (Mortgage Backed Securities) pricing deteriorate after the announcement from the Fed meeting and the much higher-than-anticipated Chicago PMI number. The economic data and announcement concerned the markets that the Fed might not wait until next March to begin the tapering of the markets that we have been so concerned about the last month. This news was bad for bonds and led to a Friday sell-off that tested the support level at 102.00, which appears to have held up.
Rates are forecast to remain neutral in the coming week, but there will be a high level of volatility, so there is definite risk to floating right now. However, there could also be potential reward, as rates may dip again. The best thing to do, as always, is to stay in tight contact with your mortgage lender and discuss a strategy for locking in a good rate. If you’d like to speak with someone from the Decker Group about your next Texas mortgage, please call (972) 591-3097 today. You can also submit your information online through our secure Rate Request form.