Luxury home buyers are hoping to close their deals before more rigorous lending rules hit early next year. The changes, issued by the Consumer Financial Protection Bureau and set to go into effect Jan. 10, will push lenders to underwrite only “qualified mortgages” that meet tougher standards. Lenders that underwrite mortgages that don’t meet the new standards could be sued by borrowers if they happen to default down the road.
Starting in 2014, borrowers will be subject to greater scrutiny from lenders, Tom Wind, executive vice president of residential and commercial lending at national lender EverBank, told the Wall Street Journal.
“Most lenders are going to say, ‘If I’m going to take on additional risk, I need to be even more careful who I lend to,’ ” Wind said.
The changes will even impact high-net-worth borrowers, Guy Cecala, publisher of Inside Mortgage Finance, told the Journal.
The rules state that starting January, borrowers can’t have a debt-to-income ratio above 43 percent, which would make it harder for individuals such as entrepreneurs – whose incomes vary widely year-over-year – to qualify for a mortgage. But the tighter standards are appealing to investors in mortgage-backed securities, as they reduce the risk of these investments, according to the newspaper. [WSJ] – Hiten Samtani