What is the APR?

APR

What is an Annual Percentage Rate (APR)?

The annual percentage rate (APR) is an interest rate that is different from the note rate. It is commonly used to compare loan programs from different lenders. The Federal Truth in Lending law requires mortgage companies to disclose the APR when they advertise a rate. Typically the APR is found next to the rate.

Example:   30-year fixed 8% 1 point 8.107% APR

The annual percentage rate does NOT affect your monthly payments. Your monthly payments are a function of the interest rate and the length of the loan.

The APR is a very confusing number! Even mortgage bankers and brokers admit it is confusing. It is designed to measure the “true cost of a loan.” It attempts to create a level playing field for all lenders. It prevents lenders from advertising a low rate and hiding fees.

If life were easy, all you would have to do is compare Annual Percentage rates from the lenders/brokers you are working with, then pick the easiest one and you would have the right loan. Right? Wrong!

Unfortunately, different lenders calculate APRs differently. So a loan with a lower APR is not necessarily a better rate. The best way to compare loans in our opinion is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate.

Then delete all fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees (assuming the lender is fully disclosing all of the fees you will pay at closing).

The reason why APRs are confusing is because the rules to compute APR are not clearly defined.

What fees are included in the APR?

The following fees ARE generally included in the APR:

Points – both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month. Most mortgage companies assume 15 days of interest in their calculations. However, companies may use any number between 1 and 30!
Loan-processing fee
Underwriting fee
Document-preparation fee
Private mortgage-insurance
Appraisal fee
Credit-report fee

The following fees are SOMETIMES included in the APR:

Loan-application fee
Credit life insurance (insurance that pays off the mortgage in the event of a borrowers death)

The following fees are normally NOT included in the APR:

Title or abstract fee
Escrow fee
Attorney fee
Notary fee
Document preparation (charged by the closing agent)
Home-inspection fees
Recording fee
Transfer taxes

An APR does not tell you how long your rate is locked for. A lender who offers you a 10-day rate lock may have a lower APR than a lender who offers you a 60-day rate lock!

Calculating APRs on adjustable and balloon loans is even more complex because future rates are unknown. The result is even more confusion about how lenders calculate APRs.

Do not attempt to compare a 30-year loan with a 15-year loan using their respective APRs. A 15-year loan may have a lower interest rate, but could have a higher APR, since the loan fees are amortized over a shorter period of time.

Finally, many lenders do not even know what they include in their APR because they use software programs to compute their APRs. It is quite possible that the same lender with the same fees using two different software programs may arrive at two different APRs!

Conclusion :
Use the APR as a starting point to compare loans. The APR is a result of a complex calculation and not clearly defined. There is no substitute to getting a good-faith estimate from each lender to compare costs. Remember to exclude those costs that are independent of the lender (title fees, appraisal, taxes and insurance, etc.)

Refinancing your property

Refinancing your property

Refinancing your property

Refinancing your property with your existing lender without shopping around. Your existing lender may not have the best rates and programs. There is a general misconception that it is easier to work with your current mortgage company. In most cases, your current mortgage company will require the same documentation as other companies. This is because most loans are sold on the secondary market and have to be approved independently. So even if you have been very good at making payments to your existing lender, they will still have to do their verifications all over again.

Not doing a break-even analysis. Find out what the total cost of the refinance is, then figure out how much you will save every month. Divide the total cost by the monthly savings to get the number of months you will have to stay in the property to break even on your refinancing costs. Example: if your refinance costs $2000 and you save $50/month, your break-even is 2000/50 = 40 months. You should refinance if you plan to stay in the house for at least 40 months.

Note: The break-even analysis only works if you are refinancing to save money. If you are refinancing to switch from an adjustable to a fixed loan, or from a 30-year loan to a 15-year loan, it is much more difficult to perform a break-even analysis.

Not getting a written good-faith estimate of closing costs. Your mortgage company is required to provide you with a written good-faith estimate of closing costs within 3 working days of receiving the application.

Paying for an appraisal when you think that the house may appraise too low. Have the appraisal company do a desk review appraisal (typically at no charge) to provide you with a range of possible values. Your mortgage company can ask their appraiser to do this for you. Do not waste your money on a full appraisal if you are doubtful about the value of your house.

Using the county tax-assessors’ value as the market value of your house. Mortgage companies do not use the county tax-assessors’ value to determine whether they will make the loan. Instead they use a market-value appraisal which may be very different from the assessed value.

Signing your loan documents without reviewing them. Do not sign documents in a hurry. Whenever possible try to get documents that you will be signing ahead of time so you can review them. It is advisable to ask for a copy of all loan papers you are signing a few days ahead of the close of escrow. This way you can review them and get your questions answered. Do not expect to read all the documents during the closing. There is rarely enough time to do that.

Not providing documents to your mortgage company in a timely manner. When your mortgage company asks you for additional paperwork, jump on it! Do not complain. They are trying to get you approved, not trying to hassle you unnecessarily! Jump through the hoops as quickly as possible. Borrowers who do not respond to requests for documentation quickly enough run the risk of paying higher rates if the rate lock expires.

Not getting a rate lock in writing. When a mortgage company tells you they have locked your rate, get a written statement which details the interest rate, the length of the rate lock and details about the program.

Pulling cash out of your credit line before you refinance your first mortgage. Many lenders have “cash-out” seasoning requirements. This means that if you pull cash out of your credit line for anything other than home improvements, they will consider the refinance to be a “cash-out” refinance. This leads to much stricter requirements and can in some cases break the deal!

Getting a second mortgage before you refinance your first mortgage. Many mortgage companies look at the combined loan amounts (i.e. the first loan plus the second) even when they are refinancing the first mortgage. If you plan on refinancing your first, check with your mortgage company to find out if getting a second will cause your refinance to get turned down.

The top ten common mistakes when buying a house

Buying a House

Buying a House

For most people, buying a house is the biggest investment they will ever make. However, few people do the research necessary to make a good buying decision. The home-purchase process is extremely confusing. With a little bit of homework and with advice from family and friends who have been through the process before, you can make this a little easier on yourself. There is no substitute for taking the time to educate yourself before you buy or refinance a house––which typically costs you 20% to 35% of your gross income!

Buying a house

Looking for a house without getting pre-approved. Do not confuse a pre-approval with a pre-qualification. During the pre-qualification process, a loan officer asks you a few questions and hands you a pre-qual letter. The pre-approval process is much more complete.

During a pre-approval, the mortgage company does all the work of a full-approval, except for the appraisal and title search. When you are pre-approved, you become like a CASH BUYER and have more negotiating clout with the seller. In some cases (especially in multiple-offer situations), having a pre-approval can make the difference between buying a home and not buying a home. In other instances, home buyers have been able to save thousands of dollars as a result of being in a better negotiating situation.

Most good Realtors will not show you homes before being pre-approved because they do not want to waste your time, their time, and the seller’s time. Many mortgage companies will pre-approve you at little or no cost. They typically will need to check your credit and verify your income and assets.

Making verbal agreements! If an agent makes you sign a written document that is contrary to their verbal commitments, don’t do it! Example: the agent says that the washer will come with the house, but the contract says that it will not. In this case, the written contract will override the verbal contract. In fact, written contracts almost always override verbal contracts. Buying a house is a very complex process––but it’s a lot easier when everything is in writing.

Choosing a lender just because they have the lowest rate. Not getting a written good-faith estimate. While rate is important, you have to look at the overall cost of your loan. This includes looking at the APR, the loan fees, as well as the discount and origination points. Some lenders add origination points into their quoted points while other lenders add an origination point in addition to their quoted points. So when one lenders says 2 points they mean 2 points, whereas another lender means 2 points plus 1 origination point.

The cost of the mortgage, however, cannot be your only criterion. There is no substitute for asking family and friends for referrals and interviewing prospective mortgage companies. You must also feel comfortable that the loan officer you are dealing with is committed to your best interests and will deliver what they promise. Often, the company that has the absolute lowest quoted rate may not be the best company for your mortgage business.

Choosing a lender just because they are recommended by your Realtor. Your Realtor is not a financial expert. They may not know what’s the best loan for you. The Realtor only gets a commission when your house closes. As a result, the Realtor may refer you to a lender that is sure to close the loan, but not necessarily the lender that has favorable rates or fees. Also, many Realtors refer you to their friends in the loan business––who again may not be able to get the best loan for you. Even if the Realtor is very professional and looking out for your best interest, you should still do homework on your own.

We recommend shopping for a loan with at least 3 mortgage companies before you make a decision. There are countless stories of consumers who wound up paying higher rates or getting a loan program that was not right for them because they blindly followed their Realtor’s advice.

Not getting a rate lock in writing. When a mortgage company tells you they have locked your rate, get a written statement which details the interest rate, the length of the rate lock, and details about the program.

Using a dual agent––i.e. an agent who represents the buyer and the seller on the same transaction. Buyers and sellers have opposing interests. A dual agent in most normal situations cannot be fair to both the buyer and seller. Most dual agents represent the sellers more strongly than they do the buyer. If you are a buyer, it is much better to have your own agent who will be on your side. The only time you should even consider a dual agent is when you get a price break from using a dual agent. If that is the case, then tread carefully and do your homework!

Buying a house without a professional inspection. Taking the sellers word that they have made repairs. Unless you are buying a new house where you have warranties on most equipment, it is highly recommended that you get a property inspection, a roof inspection and a termite inspection. This way you will know what you are buying. Inspection reports are great negotiating tools when it comes to asking the seller to make repairs. If a professional home inspector states that certain repairs be done, the seller is more likely to agree to do them.

If the seller agrees to do the repairs, have your inspector verify that they are done prior to close of escrow. Do not assume that everything has been done the way it was promised.

Not shopping for home insurance until you are ready to close. Start shopping for insurance as soon as you have an accepted offer. Many buyers wait until the last minute to get insurance and do not have time to shop around.

Signing documents without reading them. Do not sign documents in a hurry. Whenever possible try to get documents that you will be signing ahead of time so you can review them. It is advisable to ask for a copy of all loan papers you are signing a few days ahead of the close of escrow. This way you can review them and get your questions answered. Do not expect to read all the documents during the closing. There is rarely enough time to do that.

Making your moving plans too tight. Example: you expect to move out of your prior residence on a Friday and into your new residence over the weekend. So you give notice to your landlord to end your lease on a Friday and arrange for movers to come to your house on Friday. Then, your loan closing gets delayed until the next Tuesday. You now may be homeless! New tenants could be moving into your apartment, and the movers are going to charge you for wasting their time. You could be forced to live in a motel for a couple of days!
A Better Plan: allow for a 5-7 day overlap between closing and moving. In the long run it is not nearly as expensive, and it will certainly give you peace of mind. you expect to move out of your prior residence on a Friday and into your new residence over the weekend. So you give notice to your landlord to end your lease on a Friday and arrange for movers to come to your house on Friday. Then, your loan closing gets delayed until the next Tuesday. You now may be homeless! New tenants could be moving into your apartment, and the movers are going to charge you for wasting their time. You could be forced to live in a motel for a couple of days!

 

Mortgage Poison

mortgage poison

Mortgage Poison

By Scott Ramella

This month, I will tackle a subject that may upset some in the close knit mortgage community. I will detail three types of loans you should attempt to avoid at all costs and the reasons for doing so. Please note that there may be some circumstances where these loans are appropriate but for most of the people most of the time these are a bad deal for you as the borrower.

1) A Negative Amortization Loan

Never heard of one? Consider yourself lucky. A negative amortization loan is when the mortgage payments you make on a monthly basis don’t even cover the monthly interest costs accrued by the mortgage.

This leads to a negative amortization situation where the loan balance actually increases rather than decreasing with every mortgage payment you make. You will owe more on the home after making payments for a year than the balance you started with. This can be financially disastrous.

Some adjustable loans that cap the payment increases but not the interest rate can possibly be a negative amortization loan. All lenders may not be forthcoming with this information, so if in doubt, ask. The only case I can see where someone would even consider a loan of this type is if you are buying a new home and you know for sure you will soon have a substantial increase in income to allow you to refinance to more favorable terms. And I stress that it’s a big “IF”.

2) A Bridge Loan

A bridge loan does exactly what it’s called. You can get a “bridge” loan on a property you are buying while still holding the mortgage on the property you are currently living in.

A bridge loan can be very inviting to someone who wants to move into a house immediately but may not be able to sell their existing house first.

Most lenders require proof of sale of your current home before they will fund your new mortgage. A bridge loan does not require this.

I don’t approve of bridge loans for several reasons. First, most people cannot afford to pay three mortgage payments (first mortgage on existing home, bridge loan, plus the first mortgage on your new home) at the same time.

Secondly, most people can afford to place more money down if they sell their present home first, reducing both your PMI requirement and the mortgage payment itself.

Third, the fact that you have this “enabler” type of equity loan may reduce the urgency to sell your first house. Fourth, bridge loans are not cheap and carry significant fees and higher rates than normal first mortgages. Finally, there is a chance you could lose both homes.

Bridge loans are secured against both properties. If for any reason, such as a rapid drop in home values, you are unable to sell your home and can’t make all three mortgage payments, the bank can foreclose and take both properties from you.

3) The 125% Equity Loans

There is only one reason these new 125% loans exist in my mind, and that is due to greed on the part of banks and mortgage lenders. This is a very controversial loan that has come into existence in the past few years.

While all other mortgage loans are covered by the fact the home is worth more than the loan, a 125% equity loan exceeds by a great deal the appraised value of the subject property. I have even seen 135% and 150% mortgages advertised. This type of loan creates many serious problems:
A. Your loan can trap you in your house for a very long time. How do you pay off a $20,000 or $30,000 loan when you want to move or buy a new house? You owe much more than the home is worth, leaving a cash deficit when you sell your home. Your loan officer will probably never mention this to you. This is to say nothing of what happens if real estate values start to fall.

B. Although they may be sold as such, be aware that the IRS allows no tax deduction for any part of any mortgage that exceeds the home’s value.

C. They have high interest rates, high closing costs, and high monthly payments. Even with perfect credit, don’t expect to see an interest rate below 12% on a 125% mortgage. Some interest rates are as high as 18%.

D. They tend to encourage more consumer debt. Many people take out these type of loans to pay off high interest rate credit card debts. The problem is that these people, who never had to suffer the consequences of piling up too much debt in the first place, then go right back out and charge up their credit cards again. Only this time, they have no equity left to bail them out of their finacial crisis. Who ends up holding the bag for all these bankruptcies and foreclosures? You and I, as the taxpayers.

I would avoid these 3 mortgages like the plague, they are not part of any fiscally sound financial plans for you or your family. They are to be considered as last resorts only. These cures may end up being worse than the disease.

The Private Mortgage Insurance Market

PMI

What is PMI?

From our other articles, you will know that if the deposit you paid on your new property, was less than 20%, you will be required to purchase PMI or private mortgage Insurance.

In this article we are going to look at exactly what PMI is, what it does and how to go about buying it

 

Whilst you have to purchase the insurance yourself, in essence the policy provides cover for the lender.

If you default on your mortgage payments and your property ends up being repossessed by the lender, they have to sell the property to get the money that was lent against it back.

Normally the property will be sold as a distressed sale. This means that the lender will want to sell the property as quickly as possible and the sale price will more than likely be discounted to ensure a speedy sale.

With a PMI policy in place this allows the lender to discount the property by as much as 20% (including sale costs) and still get all their money back.

Whilst it’s true this is 100 percent protection for the lender, it does have advantages for the borrower.

private mortgage insurance

Advantages

1. It allows borrowers to put down a smaller deposit. Currently you can borrow up to 97% of the purchase price and therefore you don’t have to save up as much money and can buy your dream house much sooner.

2. Under the current rules as soon as you reach 20% or greater equity in your property, you no longer have to continue paying PMI. This can be because you have either made enough repayments to reduce the balance or your property value has increased.

If you have got a good deal on the purchase of your property it may not be a long period of time that you have to make your PMI payments, as your property value could easily increase.

The Costs

PMI costs are roughly between a quarter and two percent of the total loan (for example a loan of $100,000 would cost between $250 & $2000 per year. Of course the costs depend on the risk factors, the loan to value, the length of the loan and of course your overall credit score. The higher the risk, the greater the premium charged.

There are six companies who offer PMI in the United States, they are United Guaranty, MGIC, Genworth, Radian, Essent Guaranty and FHA.

Whilst this is probably the only insurance you will buy that does not directly benefit you, as discussed above, it is definately in your interests to keep a note of when you expect the equity in your property to be greater than 80% and also to shop around for the best premium.
There are also a number of different options that you can choose from.

Monthly Payment

This is a useful way of spreading your PMI payments on a monthly basis. It also helps reduce closing costs as no payment for PMI is required. The premium is also excluded from the qualified Mortgage 3% points and fees cap

Single premium customer paid

The premium is due at closing, but can be paid by anyone (for example if you are buying a new house, the builder could pay it as an incentive). It can be paid by cash or incorporated into the mortgage. The plan can be refundable or non refundable. For information we recommend checking out thatsinsurance.com

For obvious reasons the non refundable premium is the cheapest option. If you believe that there is a slim chance of 20% or more equity in your property in the forseeable future, then this could be the best option.

The total premium has to be included in the 3% calculation.

Single Premium lender paid

This is a popular option. The lender pays the premium and recovers the cost by charging a slightly higher interest rate. The benefit here is that because the cost is borne by the lender, it means you could afford up to 5% more property for the same amount.

 

PMI Comparison Tables

What are the costs involved when buying a house in the US?

mortgage

A breakdown of mortgage costs

You have taken our advice got your pre-qualification letter confirming how much you can borrow. You have worked out the sort of purchase price you can go up to, including any deposit or down payment you are going to make.
Now should be the fun bit, finding a house to fall in love with.

However before you start day dreaming of domestic bliss in the house of your dreams, take a reality check and lets look at the other costs involved in buying a house. Most experts estimate that you need to set aside an additional 3 -6% of the purchase price to cover those additional costs.

Property Taxes

Don’t forget that you will have to pay property taxes and may have to pay a percentage of what the seller has already paid. Property taxes range from 0.5% – 4.2% and from $300 – $9,000 depending on the state and the value of the property that you live in.

Property appraisal

Your mortgage lender will require an appraisal on your new property. This is for a number of reasons. The first is to prevent mortgage fraud (to stop you borrowing more than the property is worth) The second is to make sure that in the event you default on your mortgage payments and they have to repossess the property, there is sufficient equity to cover the loan and any outstanding interest.

The cost of appraisal is normally around $200 – $300 depending on the state you are buying in and the size of the property.

The report judges the value of the property you are buying based on the square footage of the plot and the property and the area it is situated in.

Whilst it appears this report is solely for the benefit of the lender, if the reports values the property at a higher price than you are paying, then you know that you have made equity overnight. If the appraisal is lower than the purchase price, then this gives you the opportunity to re-negotiate with the seller or withdraw from the deal.

Survey and inspections

Some lenders will insist on a more substantial survey of the property. If they do not, we recommend that you have one anyway, as this will show up any problems, that you may not have noticed. For example are there any structural problems, are the electrics up to scratch? Is there a problem with dry rot or wood worm? This report should at worst serve as protection that you are not going to be hit with large repair bills the moment you move in, and at best allow you to renegotiate the purchase price based on its findings.
Further expert reports may be necessary based on the initial assessment.

Cost of closing the deal

Here are a list of other fees that you will have to pay before a property becomes yours:
Your lender may charge a processing fee and a fee for checking your credit history

Title Insurance. This is required again to protect the lender in the event the title of the property has a problem or is not clean.
Title search fees. Your attorney will have to carry out certain searches on the property to ensure there are no outstanding taxes, mortgage payments and to make sure the title of the property is good.

Recording fee. This is normally sorted by your attorney and paid to the local council so that the land register records are updated with your details

Attorney fee. A registered attorney will need to collect all the paper work, carry out the required searches and make sure that everything is registered correctly. He will charge a fee for his services plus any dispursements.

Home insurance. Obviously you will want to insure your property, in most cases buildings insurance will be a compulsory requirement from your lender. It is strongly recommended that you insure your contents.

PMI. If the deposit that you paid was less than 20% of the purchase price, you will be required to purchase PMI or Private Mortgage Insurance. Whilst you have to pay the premium, this is actually protection for your lender. It covers any shortfall between what you have borrowed and what the property is worth, in the event that you default on your mortgage and the lender has to repossess the property.

These fees can quickly add up. so it is important that you calculate them as accurately as possible. Your lender is required by law to give you a good faith estimate, but remember it is just that, an estimate! Some lenders will allow you to add the costs to your loan.
This can be helpful, but remember that you will be charged interest on this money over the term of the loan, which in most cases is 30 years, so it will work out to be much more expensive in the long run.

How to get a mortgage in the US

pre approved mortgage

What do I need to proceed?

There are several steps that you have to go through to obtain approval for a mortgage and buy a property in the United States of America.

Pre-Qualification

 

  • Before you even start looking at properties that are for sale, the most important step is to find out how much you can afford to borrow and what type of loan will be the best fit for your circumstances.
  • You need to go through the pre assessment steps to find out, whether you have enough income and that your debt-ratio is good enough, that a bank will actually be willing to lend you sufficient funds to be able to purchase a home.
  • Once you have gone through this process , many lenders will give you a letter with an estimate of how much you can borrow, so that you can give this to your realtor. This will give them the confidence that you are a serious candidate and that you are not wasting their time.
  • The pre qualification requires only basic details, name, address an estimate of your total annual income and likewise your monthly household debt.the mortgage balance

Pre approval

 

  • The next stage would be pre approval. This is a proper application to a lender who after various vetting procedures will provide a letter confirming conditional approval of a mortgage and for how much.
  • This letter is worth much more than one for pre qualification, because it means that your credit history has been checked and verified, bank statements, wage slips and tax returned have been examined, together with a detailed breakdown of your income and expenditure.
  • It means that if you find a house you wish to purchase that you don’t have to worry about the mortgage, because it has already been approved. A pre approval loan letter normally lasts for 90 days, so you have a comfortable amount of time to find a property before you have to go through the process again.

 

What is Involved ?

 

Since the 2008 collapse of the mortgage market, the process has become more rigorous and your financial health will be under much more scrutiny. Now lenders may contact your employer to verify you income. If you are self employed then your tax return and company accounts will be required.

Whereas prior to 2008 you could borrow 100% of the property purchase price, now you will also need a deposit or down payment of between 10 – 20%.

You will also need to be able to provide evidence that the funds are available and where they have come from.

In today’s economic climate you will need a credit score of at least 620 to get a Federal Housing Administration backed loan (this is a loan insured by the federal government to reduce losses on defaulting mortgages. It allows lenders to offer better rates)
If your credit score is over 740 then you will be able to secure the best rates available. If your score is below 620, then the interest rate is likely to be higher and you will be asked to contribute a larger down payment.

The bottom line with the house buying process, is to find out how much you can afford before searching for a property. After all you wouldn’t go into a shop and buy something without your wallet would you?

The majority of realtors will reject any offer on a property without a pre approval or pre qualification letter. If there is competition for a property and one purchaser has a pre-qualification letter and the other doesn’t, which offer is the seller going to accept?
Filling in mortgage forms may not be as fun as house hunting. But remember there is nothing worse than falling in love with a property only to find out that you just can’t afford to buy it!!

The US Mortgage Market

fannie mae

A look at the US mortgage market

Despite the mortgage and property crash in 2008, Freddie Mac and Fannie Mae now regulated by the Federal Housing and Finance Agency, still guarantee over sixty percent of all mortgages place in the USA. freddie mac and fannie mae
Despite a slow recovery in the US Housing sector, the rules governing borrowers by these two companies are pretty strict.
The new rules now in place for qualifying mortgages or QM’s as they are known are as follows:
Loan to value ratios have to be at least 80% and current guidelines restrict debt to income ratio to 45%. According to the strict regulations, your credit score must be at least 620 to qualify, although in reality anything under 660 will receive a lot more scrutiny and take longer to approve.

This new tougher lending criteria will undoubtedly disqualify many borrowers and with the housing sector still fragile, this may harm recovery. That combined with much lower lending forecasts and a mountain of student debt, estimated to be over $1 Trillion dollars, may mean limited growth over the next couple of years.

However there is hope for those consumers that don’t fit the new QM rules. Several lenders have potentially spotted a gap in the market and are offering loans to non QM borrowers.

New Players entering the market place

One such company is WJ Bradley Mortgage Capital, who will be ready to start lending to this particular sector within weeks.
The company can see great opportunities to help those borrowers who don’t fit QM’s and whose credit score is below 660 or who don’t have large deposits available. These types of borrowers may have genuine reasons for not fitting the standard criteria and can still be great to lend to.

home ownership in the US

Obviously rates will be slightly higher to reflect the increase in lending risk, but ultimately they could end up with a good market share.
Whilst the rules for QM’s are tight, of course this does not stop any lender from offering mortgages that fall outside of the qualifying criteria. The only difference is they will have to keep some or all of the risk on their own books. Of course that has its own implications with banks and lenders tighter capitalisation requirements.
A secondary securitized market hasn’t happened yet and once the scheme is up and running WJ Bradley want to securitize the loans, but this is some way off at present. Although it is expected that large loan aggregators like Wells Fargo and J.P. Morgan Chase will be the first to step in.

Tough New Tracking System

One positive note with securitised lending is that there is now a rigorous system for tracking the originators of loans. This lack of transparency was a major cause of the crash in 2008 as these financial packages were being sold without any real knowledge of what was in them.

mortgage payments
The new regulations now mean that a state authorised loan officer is given a number which is added to every mortgage or loan that he or she authorises. This number will follow them from employer to employer and now it is possible to trace the mortgage history and the officer involved, which will assist with transparency and mortgage complaints, even if the mortgage is for a thirty year period.