Washington D.C. (PRWEB) January 29, 2013
By Eric Peters
New rules for mortgages good idea, still not a guarantee
A set of new guidelines for mortgages released Jan. 10 is going to go a long way to preventing another mortgage crisis like the one the nation just got out of. But, it’s not a guarantee that foreclosures won’t happen, said the partners at Apollo Financial Group, a distressed debt trading firm specializing in non performing residential mortgages.
Among the new guides from the Consumer Financial Protection Bureau are:
“These are good ideas, especially the rule on the increasing principal,” said Dean Anastos of Apollo. “When someone buys a home, they are making an investment. While the value of that investments should rise over time, the amount needed to pay that investment off should not increase.”
Mr. Anastos also saluted the ending of “interest only” loans. He said too many people have signed up for this kind of loan, thinking they were getting a rally good deal because of the low payments. But reality is they were not ever making payments on the principal.
“They were, and are unfortunately, doing little more than paying rent. They are not building equity,” he said.
The new guidelines also say lenders should look at the buyers ability to repay the mortgage and limit loans to 43 percent of the borrower’s monthly income.
“If mortgage companies had bother to look at incomes and the ability to repay the loan, we’d never have experienced the mortgage crisis. Instead, some companies saw a chance to make immediate profits and didn’t bother to consider long term results” said Dean Anastos.
Another idea out forth which both men like is the no minimum down payment to get a mortgage. They said this frees many people up to become homeowners.
“Look at this way. A lot of people have lived as renters for years and never missed a month’s rent payment. But asking them to come up with $20,000 to buy a $100,000 home, that may be be pushing them beyond what they can do,” Mr. Anastos said. “If the family has a good rental history, chances are good they’ll also be able to make mortgage payments, if that payment is close to their rent.”
Meanwhile, the mortgage industry is eagerly awaiting QRM (qualified residential mortgage) rules from the Federal Reserve. Mr. Brava , senior partner at Apollo, said he hopes the Fed takes a close look at the guidelines passed down from the Consumer Financial Protection Bureau. He said a number of the ideas will make good mortgage policy.