New Year Brings New Loan Requirements

Starting January 1, 2014, there will be a multitude of changes in mortgage lending practices as a result of the implementation of the, “Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010”. In short, some 16 new and heavy regulations on banks and lending institutions will go into full effect. Here are some of the ways the Act will affect you.

Mortgage Difficulties

Marcus McCue, executive vice president at Guardian Mortgage said last June 2013 that, 48 percent of borrowers who could get a mortgage through his bank today will not qualify after 2014 according to a Yahoo Homes report.

One of the reasons why is the creation of the, “Consumer Financial Protection Bureau” (CFPB) as a result of the Dodd-Frank Act. Described as a “Pit Bull” watchdog bureau, the CFPB is intended to protect the consumer from a risky loan and predatory mortgage lending. That’s a good thing. But the unintended consequences are loan denials to “borderline” borrowers and increased loan qualification requirements for currently qualified homebuyers.

Foreclosures will be much tougher on the lender. Banks must now prove they have done everything possible to help the consumer. Some of the options include refinancing the loan at a lower amount or even paying the debtor to relinquish all claims to the property. As a result banks will be scrutinizing borrowers under a hyper critical eye.

Government Loan

In a perfect world where everyone has a secure job and paid their bills on time the Dodd-Frank Act would have little impact on the housing market. The burr in my saddle is that it was people like Rep. Barney Frank that perpetuated the housing bubble and crash in the first place. Through his (and others) efforts the federal government lowered lending requirements thus allowing banks to make a loan to less and less qualified borrowers. This all started back during the Bush administration and in fact, the President warned of the potential hazards.

The federal government helped to create the housing bubble and crash. Now the federal government is helping to fix the problem.

“The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.” President Ronald Reagan

It will be more difficult to get a home loan after the first of the year. You may consider locking in your loan now if you are contemplating a purchase.

Margaret Hitchcock Real EstateMargaret Hitchcock is a Realtor and owner/operator of Hitchcock Realty in Morehead City along the Crystal Coast of North Carolina. Whether it is a home or condo, on the beach or mainland be sure to contact Margaret today. Visit her online at or call (252) 269-2893.

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