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Volume 29 - Number 51

January 17, 2013

New Rules Tighten Standards for Nonprime Loans, But Little Impact Expected as Few are Originated

A number of rules from federal regulators in the past two weeks aim to tighten standards for nonprime mortgage lending, including requirements for ability to repay, appraisals and escrow accounts. Industry analysts suggest that the standards would have limited subprime mortgage lending during the boom of 2005, but those markets were dried up long before the new rules will take effect. In setting new rules for the nonprime market, federal regulators have established criteria for “higher-priced mortgage loans.” First-lien HPMLs are those with an annual percentage rate of at least 1.5 percentage points above the “average prime offer rate” for similar loan types, and more than 3.5 percentage points for junior-lien HPMLs. Some $12.38 billion in higher-priced mortgages were sold...

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What will Fannie Mae’s and Freddie Mac’s new 97 LTV programs mean for your business?

It will give our business a big boost as there is a lot of pent up demand for the product.
It will have only a minor impact on our overall business as we already are doing high LTV business through FHA and some of our high LTV FHA business is likely to shift to Fannie and Freddie.
It won’t have any impact on our business as we plan to steer clear of all high LTV business – particularly in the GSE market.

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