On January 10th, 2014, new mortgage rules took effect throughout the U.S. Although the rules are intended to protect mortgage borrowers from predatory lenders, they will most likely make it harder to obtain a mortgage or refinance a current loan.
Under the new rules, lenders must provide a monthly billing statement that clearly indicates how much money the homeowner paid went to escrow, principal and the balance owed. The monthly billing statement must also state any service or transaction fees paid.
When making a payment, or an additional payment, the lender must credit that amount the day they receive the funds. If you write or call asking the total amount to pay off the loan, the lender must respond to you within 7 days of receiving your inquiry.
If you write your lender with any question or concern in regards to your account, they must let you know within 5 days they have received your inquiry. Then, the lender has 45 days to respond to the issue and let you know the outcome.
When a homeowner is paying more than 30% of their income on their house payment, analysts say the home is unaffordable or “cost-burdened”. In the U.S., more than 21 million people are paying more than 30% on their house payments, and of that, more than 11 million people are paying more than 50% their income (“severe burden”) on their house payment.
Additionally, there are over 11 million homeowners who are seriously underwater in the U.S. Unfortunately there is a severe shortage of affordable housing bringing the question once a homeowner is foreclosed on, where do they live?
Previously, a lender had no obligation to respond to a homeowner’s request for lower monthly payments. With these new rules, lenders are required to attempt contact with homeowners within 36 days of a missed payment and give the homeowner any workout options within 45 days. The lender must give the homeowner a single point of contact within their customer service department. Customer Service must respond with a decision within 30 days. However, the lender does NOT have to give the homeowner a workout agreement and can start foreclosure proceedings once the payment has been late 120 days. Again, it’s stressed the lender must “attempt” contact, it’s not required.
If the homeowner has an increasing ARM (adjustable rate mortgage), the lender must notify the homeowner by mail 210 to 240 days prior to the increase. A second notice from the lender must follow 60 to 120 days before the new payment.
Under these new mortgage rules, lenders are required to make sure the potential buyer (or homeowner refinancing) is financially able to make the mortgage payments. Under the new “Ability-to-Pay Rule” borrowers can’t exceed a 43% debt to income ratio (total monthly debt divided by total monthly gross before tax income). In other words, if you have an $80,000/year income, your monthly debt should not be more than $2,800. Your debt to income ratio is critical in securing a loan, or refinancing.
Under the “Qualified Mortgages” part of the new rules, lenders are required to document and verify an applicant’s income, assets, credit history and debt. Underwriters will also ensure any credit card debt interest rate will remain the same (no ‘teaser or short-term’ lower interest rates). Borrowers will have more paperwork to fill out. That, in turn will probably mean longer loan processing times.
Banks, housing groups and lenders are bracing for “paperwork headaches” and delays. The lenders fear a wave of foreclosures in which the homeowner can claim the lender should have known they couldn’t afford the loan.
Whenever a homeowner is in fear of foreclosure, unsure of their home modification, gets a notice of any kind from the courts, they should immediately contact a reputable, foreclosure defense attorney. Colorado’s foreclosure laws are very complex and unique and should be handled by an experienced foreclosure defense attorney. Homeowners need to protected against lenders ‘coming after them’ and for any deficiency which happens months and even years after foreclosure. An experienced foreclosure defense attorney will cover all these topics for the distressed homeowner.
Keith A. Gantenbein, Jr. is a Colorado consumer advocate attorney, foreclosure defense and real estate attorney located in Denver and servicing all of Colorado. His foreclosure defense practice includes: foreclosure prevention, foreclosure assistance, loan modifications, short sales, and all other foreclosure defense legal assistance. He also handles bankruptcies, wrongful credit reporting, mortgage negotiations, lender liability, real estate, civil litigation, debt defense, debt harassment, contracts and landlord/tenant. If you think you will be facing debt collection, foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.