Last month involved several regulatory compliance updates and hot topics in the Mortgage industry. We’ve rounded up some key updates and how they will affect you and your financial institution going forward.
Fannie, Freddie Take a Close Look at Mortgage Risks as Climate Events Multiply
New research compiled by U.S. government-backed mortgage companies recently shows housing markets are beginning to respond to damages from climate change-fueled floods, storms and disasters.
Fannie Mae and Freddie Mac, whose portfolios underpin half the $16 trillion U.S. mortgage market, recorded changes in home sales prices and an uptick in mortgage defaults among damaged properties in Texas after the destruction caused by 2017’s Hurricane Harvey, a storm whose extreme rainfall scientists say was worsened by climate change.
Why Is This Important to Me and My Financial Institution?
The topic of climate change is one to watch moving forward, especially as the GSE’s and the industry as a whole look to mitigate against risk and loss.
CFPB Indefinitely Extends QM Patch
At a session during the Mortgage Bankers Association’s Annual event, Consumer Financial Protection Bureau Director Kathy Kraninger announced the extension of the Qualified Mortgage Patch until a new QM Patch is decided on.
“To make it clear to the market that we are going to have a smooth transition to the new QM, the patch will be available until the mandatory compliance date for the new QM,” Kraninger said. “Hopefully that is understandable and helpful to folks. We are moving smartly but expeditiously to pull this together and enable that smooth transition.”
Earlier this year, the bureau announced a proposed rule that would amend the qualified mortgage definition in Regulation Z to replace the debt-to-income limit with a price-based approach, saying it preliminarily concluded that a loan’s price, as measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction, is a more holistic and flexible measure of a consumer’s ability to repay than DTI alone.
Why Is This Important to Me and My Financial Institution?
The extension of the QM patch is a positive development for the mortgage industry, as it will not place undue emphasis on borrower DTIs and instead consider a borrower’s full profile for qualification purposes. The results of the recent election and the timeline for the GSE’s exit from conservatorship will be items to keep tabs on in the future as it relates to how long the QM patch will be extended.
New Normal: Borrowers Satisfaction With Remote Mortgage Closings Grows
Despite the disruption caused by the coronavirus pandemic, borrowers have become well-adapted to e-signings and remote closing and were highly satisfied with their overall mortgage closing experience.
In a recent ClosingCorp survey, 95% of borrowers who had purchased or refinanced a home during the onset of COVID-19 said their closings were efficient, and 90% said that they were satisfied with their experience, even though most of the transactions involved e-signing and remote closings.
Why Is This Important to Me and My Financial Institution?
The pandemic has forced the mortgage industry to look for alternatives to how mortgage transactions have historically been conducted in the name of safety and security. One bright spot has been the move to remote closings, which consumers have found to be a much more efficient and user-friendly way to close their loans. As the home-buying demographic continues to trend toward the millennial generation (and younger), the demand for these ease of use, customer friendly technologies is only going to increase.
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About the Author
Michael Rhodes
Product Manager at OnCourse Learning
Michael Rhodes is the Product Manager for the mortgage segment at OnCourse Learning. Michael has worked in the financial services industry for 24 years and keeps up to date on mortgage industry hot topics. Michael received his Bachelor of Arts in Business Administration from Carroll University.
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