Mortgage Industry Changes... Who Wins?

Mortgage Industry Changes... Who Wins?

The mortgage industry has mostly settled in now that 2008 and 2009 are in the rear view mirror. Guidelines have been mostly standardized and given a few exceptions mortgage lenders offer the same suite of mortgage programs. And lenders like this uniformity. They know that when they approve a mortgage loan it�s in full compliance with lending requirements. Yet there have been changes over the past year or so and we wanted to point out a couple that we think are the most important.

Perhaps the most significant change was the first loan limit increase in nearly a full decade. That�s because the average home values finally increased across the country to the point where Fannie Mae and Freddie Mac could authorize an increase in the loan limit. The loan limits went from $417,000 to $424,100 for most parts of the country. The Federal Housing Finance Agency, or FHFA, compares October to October average home values and the year-to-year increase justified the loan limit increase for conforming loans.

That too then increased maximum loan limits for both VA and FHA loans. The maximum VA loan limit was raised to match the $424,100 conforming mark. FHA loan limits are based upon the median home value for the area as compared to conforming limits and set by the Department of Housing and Urban Development. This was a big change and is also an indicator the economy is moving right along.

Another change that affects more people than you might imagine, those with student loan debt. Fannie Mae changed the way student loans are evaluated giving the borrowers a greater ability to qualify for a loan. Specifically, Fannie has an income-driven repayment plan which allows the borrowers to pay as little as 10% to 15% of the take-home pay to be used as a minimum qualifying payment. The drawback with this program however is it can take 20-25 years to pay off student loan debt by making these reduced payments instead of the full payment each month. Prior to this change, those in a repayment plan couldn�t use the reduced amount but the full amount required.

These changes are truly a win-win for both lenders and borrowers. It allows lenders to make more loans and increase home ownership and higher loan limits mean lower interest rates on higher loan amounts.