This Article Is About Changes In Mortgage Lending And Guidelines And How It Affects Buyers

2021 has come and is almost gone in several weeks. 2021 was a tough year for Americans due to the coronavirus outbreak last year in February 2020.  It was a very tough year in mortgage lending. Mortgage Rates have increased to record highs since the 2008 real estate and mortgage meltdown. The Federal Housing Finance Agency (FHA) has increased conforming loan limits to $548,250.

Both FHA and conforming loan limits have been increasing year after year for the past several years due to the surge in skyrocketing home prices. HUD, the parent of FHA, has increased FHA Loan Limits to $356,362 following FHFA’s conforming loan limit increase.

The Reason For Mortgage Guideline Changes

The reason both federal agencies increased loan limits nationwide was due to rising home prices. Higher mortgage rates have not put a dent in housing demand. 2019 and 2020 sustained a substantial increase in mortgage loan production nationwide on purchases. Refinances have drastically slowed down to increase in mortgage rates. Many refinance mortgage shops have laid off tens of thousands of workers nationwide. Home purchase mortgage loans were substantially up from the 2016 levels.

Due to higher mortgage rates, the majority of the reduction in mortgage loan volume was from refinancing mortgages. Refinance mortgage loans went down a whopping 60% in 2019 compared to 2018 numbers. However, 2020 refinance numbers have skyrocketed like never before due to historic low mortgage rates.

2021 Outlook In Mortgage Lending

Will 2021 continue to skyrocket spiral-like 2020 with refinancing mortgages?  Nobody has a crystal ball but most mortgage experts and analysts have mixed predictions. Home Purchase Loans is expected to increase due to the lowest mortgage rates since 2008. Experts predicted higher mortgage rates in 2020 but mortgage rates plummeted to historic lows. January and February  2020 hit an 18 month low.

Rates started on a downward trend. Average mortgage rates towards the latter of 2020 were at 2.97% on 30-year fixed-rate mortgages. Today, mortgage rates dropped to 2.75% on 30-year fixed-rate mortgages.

Lowest Mortgage Rates In 3-Years

30 year fixed mortgage rates have kept on dropping since the beginning of 2019 due to the Trump Administration and ongoing positive economic numbers week after week:

• We are now hovering around the 2.75% mark
• Economic numbers such as jobless numbers, job growth, and earnings reports are expected to be stronger in the coming months
• This will most likely trigger a mortgage increase from the Federal Reserve Board later this year
• The stronger the economic number is, the worse it is for mortgage rates
• The weaker the economy is, the better it is for mortgage rates
• If the stock market plummets, it is good for mortgage rates
• The Dow Jones Industrial Average is at a historical high hovering at 29,000
• Many mortgage lending experts who were predicting mortgage rates to skyrocket to 5.0% by year’s end were completely wrong

Mortgage rates are at 2.75% on the week ending October 31st, 2020.

Changes In Mortgage Lending With New GFE, Truth In Lending, And HUD-1

The Old Good Faith Estimated was put to rest on October 3 of 2015. There will no longer be a Good Faith Estimate, Truth in Lending, and HUD-1 settlement statement:

• All the old GFE, TIL, and HUD-1 will become extinct
• These forms will be replaced with an easier to understand, simpler Loan Estimate and Closing Disclosure Forms
• GFE and TIL was replaced by the new Loan Estimate Form also referred to as LE

HUD-1 settlement statement and the final Truth in Lending Disclosure was replaced by the Closing Disclosure Form.

Changes In Mortgage Lending With The Consumer Finance Protection Bureau

The Consumer Finance Protection Bureau also referred to as the CFPB, is the governmental agency that has initiated the implementation of these new mortgage loan disclosures with the objective for the consumer to better understand the terms and conditions of the mortgage loan. The new closing settlement statement is now supposed to be disclosed in 3 business days in advance of closing. current HUD-1 settlement statement only needs to be disclosed one day prior to closing. This new rule will most likely cause delays in mortgage loan closings.

Lower FHA Annual Mortgage Insurance Premium

With HUD lowering the FHA annual mortgage insurance premium from 1.35% to 0.85% on January 26, 2015, many homeowners still have not refinanced their FHA Loans yet. Homeowners with a higher FHA mortgage insurance premium should take advantage of refinancing their current FHA Loans before rates go any higher. Take advantage of the huge savings from the 0.50% FHA annual mortgage insurance premium reduction.

2020 Changes In Mortgage Lending On Conventional Loans

Conventional loan borrowers, first-time homebuyers, can now qualify for a conventional loan with a 3% down payment. Fannie Mae and Freddie Mac have reinstituted the 3% down payment conventional loan program for conforming mortgage loans to promote home purchases and homeownership. The 3% down payment conventional mortgage loan program is for first-time homebuyers or home buyers who did not have any homeownership in the past 3 years.

The maximum conforming loan limit is $548,250 unless the property is located in a high-cost area. Income-Based Repayment is now allowed on FHA and Conventional loans. The maximum loan limit on FHA Loans is now $356,362.

Other Changes In Mortgage Lending

HUD announced to lower its loan to value cash-out refinance guidelines to 80% from 85% LTV. The VA no longer has a maximum loan limit cap on VA Loans. VA maximum cash-out loan to value is now reduced to 90% from 100% LTV. HUD relaunched FHA Spot Loans. FHA Condo Buyers can now purchase condos in non-HUD-Approved condominium complexes. Gustan Cho Associates offers Non-QM Loans and bank statement loans for self-employed borrowers. Gustan Cho Associates now offers Non-QM Jumbo Loans with 500 FICO.

For more information about the contents of this blog and/or other mortgage-related articles, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.