posted 09-13-2013 03:57 PM                  

Another CFPB rule that will take effect on January 1 is the "Ability to Repay Rule"

Every mortgage application will be subject to this rule and any applicant that does not meet it's criteria will be denied a loan regardless of your credit history, your credit score or your reserves.....It basically says that if your debt-to-income ratio is above 43% no lender will be allowed to grant you a loan....Your government prohibits it....Even if you have $3 million in your IRA you won't be able to qualify....

posted 09-14-2013 10:11 AM                  

I don't have time to dig up documentation to prove my statements above but can assure you that I am not in the habit of posting information that is untrue....

You may call Freddie Mac to ask about "qualifying income' at 1-703-918-5823 or browse through this website.
http://solutions.allregs.com/category/4/single-family-lending

You may also want to surf the web under "Ability To Repay Rule"

Here's one:..

http://files.consumerfinance.gov/f/201301_cfpb_ability-to-repay-summary.pdf

Of interest in this "final rule" is the paragraphs that deal with approving loans with ratios OVER 43%...I can tell you that I do not know ANY underwriters who will overide guidelines....Doing so is almost a guarantee that if the loan goes bad the originating lender will be forced to buy back the defaulted loan from Freddie of Fannie.

I can understand your reluctance to believe that the new rules are so ridiculous....In our business we hear that from consumers on a regular basis....That's what happens when the government starts underwriting loans.....

You may also want to call your local bank or mortgage broker....Be sure you're speaking with a knowledgeable person and ask them if having substantial liquid assets can offset a debt ratio over 43% on a mortgage.

I'm not accustomed to being called a liar or ignorant of the laws that regulate my business so I'll assume that was not your intent. Check it out for yourself.

posted 09-15-2013 01:16 PM                  

I've attached a blog from Christina Boyles, VP at Freddie Mac that demonstrates that point...The article involves using IRA or 401K assets to qualify for a mortgage. (Note also, that unless you are eligible to withdraw from your plan without penalty, NONE of the asset can be used for income qualification)

IN PARAGRAPH 4 she explains the formula for qualiying on retirement income from a qualified plan....Read that and then let's do some math...

Let's say the borrower is a retired 65 year old that has $800,000.00 in his IRA and he has elected to receive a monthly disbursement of $4,000.00 per month. That $4,000.00 CANNOT be used as qualifying income.....See the formula below that effectively LOWERS his qualifying income to only $1,555 per month.

At that rate, (and not even considering the earnings from his account balance) he should be able to receive that $4,000 each month for the next 200 months (16 years, 8 months). That would make him almost 82 years old when the account was depleted....(again, lenders may not assume that there will be dividends or gains from his account)

Now, following the Freddie Mac guideline formula here is what he can expect his $800,000.00 nest egg to qualify him for:

$800,000.00 balance in retirement accounts
X70%
= $560,000.00
divided by 360 months
equals $1,555.00 monthly income for qualifying
times 43% maximum debt to income ratio
EQUALS $668.00 maximum monthly of ALL debt

Note: The $668 per month includes principal and interest on the proposed mortgage, real estate taxes, homeowners insurance, association fees plus all other installment payments (car payments, credit cards, etc) In this senario the borrower would be lucky to qualify for a $75,000 30 year mortgage (if he had no ther debt) even though he has $800K in the bank....He would qualify for EVEN LESS if he wanted a shorter term loan.

So there you have it....$800,000.00 in liquid assets in the bank and your government says the borrower's total monthly obligations MUST be limited to $668.00. (some area's have real estate taxes alone that would exceed that amount)

Here's the Freddie Mac link http://www.freddiemac.com/news/blog/christina_boyle/20130513_financial_assets.html

posted 09-15-2013 07:26 PM                  

quote:

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Originally posted by garysss:
I can see some reasons for this from your example. Unless there is a hold put on his account, he can take a loan, than spend all that money on something else later and have no income or assets to repay loan. 65 years old and a 30 year loan doesn't go together well. I think if your putting a large down payment it should make a big difference in what you qualify for.

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Gary...ECOA Laws currently in place prevent a lender from discriminating on the basis of age....If a 65 year old, or even an 80 year old applies for (and is qualified for) a 30 year mortgage, they will get it...

And as far as spending their IRA on something else and not being able to pay:.....Consider borrowers who are working for an employer for two or more years and are qualified for a mortgage based upon on their CURRENT average monthly income from wages....If, after the loan is closed their employer goes out of business and they have no job what do you think happens?...They have no income and are unable to pay their mortgage payment....No one can predict these things with certainty...

Again....Those of us who have been in this business for years realize all the inherent risks and, in the past, have been able to analyze each borrower's circumstances individually....But suddenly the government has decided that they know better and they have a "one size fits all" solution...

Think of this...Your grandchildren may never own a home and the "American Dream" might become an impossible dream......Their home might become a place that is "assigned" and provided by the government...All we have to do is give up another "freedom" to make our own decisions and to become beholden to a socialistic, "nanny state" government...