How Does the CFPB Impact Realtors?
The Consumer Financial Protection Bureau issued new rules back in 2013 that had wide-sweeping effects on the mortgage lending business. Consequentially, other people in the housing industry felt the effects of the change as well. Professionals like builders, contractors, home sellers and especially Realtors had to adjust their practices in response to the smaller window of opportunity that was being given to consumers.
These new rules helped prevent one-sided lending practices that could easily ruin a new homeowner’s financial situation for many years. Conversely, plenty of responsible would-be homeowners who simply do not have the capital to purchase a typical mortgage are now left renting or trying to pull together a down payment. Regardless, many would-be homeowners are now forced to tighten up their budgets or simply walk away from a sale.
To help you keep in mind what has changed, here are the newer CFPB rules most pertinent to Florida real estate agents and how they might affect the home buying or selling process:
Appraisal Delivery
One of the most important rules set up by the CFPB is that a home’s appraisal results must be delivered to the buyer no less than three business days before the close of a sale. This requirement means that some closing dates will need to be pushed back, especially if repairs are still being made that could affect the appraisal outcome.
To avoid this kind of hassle, Realtors can have their clients sign a form that waives their rights to this advanced notice. They can receive the appraisal as late as the closing day, and no schedules will have to be overturned and reassembled. For more information, visit Marina Title’s Realtor page.
Debt to Income Ratio
A rule that is most likely to impact a potential sale is the new debt to income ratio requirement. Anyone financing their home must have a debt to income ratio no greater than 43 percent in order to prevent them from getting too far underneath their loan amount from the start. This requirement effectively eliminates interest-only loans and ultra-low down payments. Many “jumbo loans” will also have to be reconsidered.
Like the appraisal requirement, there are loopholes. Anyone applying for a loan under Fannie Mae, Freddie Mac, the FHA or the VA will be using an automated desktop underwriting procedure, which exempts them from the requirement. This work-around will be in effect for at least the next five years.
Cap on Mortgage Fees
An issue that is less likely to affect Realtors is the cap on the amount of fees allowed to be charged on a mortgage. Any loan between $60,000 and $100,000 will have a fee cap of $3,000. Loans of $100,000 or more will only be allowed to charge three percent of the loan amount in fees.
This requirement does not apply to escrow service charges or FHA insurance premium fees, although regular insurance premium fees are not exempt. The effects of this stipulation will be subtle, but expect a slightly smaller acceptance rate by lenders. These rules apply to all residential real estate transactions.
For more information about the CFPB and other real estate issues, call us today at (305) 901-5628 or send us an email at [email protected].
