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25 Jan

Top 10 Effects Of The New Mortgage Rules (from mortgagetrends.com)

General

Posted by: Randy Johnson

1. Lower purchase and refinance demand will depress mortgage volumes, sparking greater rate competition as lenders battle for less business

2. A small portion of home buyers will sprint to buy homes with a 35-year amortization before March 18, followed by downward pressure on home prices after March 18 as the amortization reduction removes market liquidity

3. Negative personal consumption and wealth will result thanks to equity take-out restrictions, rising rates and softening home prices

4. Unsecured debt usage will increase as homeowners are restricted from accessing as much of their equity, leading to even greater bank profits in unsecured lending

5. Default rates will see no material improvement

6. No significant improvement will occur in the number of risky borrowers, due to no change in TDS limits or Beacon score requirements

7. HELOC rate discounts will be less frequent as some non-bank offerings disappear and HELOC funding costs inch higher

8. Banks will pick up mortgage market share

9. More private lenders will offer high-interest uninsured 2nd mortgages to 90% LTV

10. If amortization restrictions accelerate falling home prices, we’ll see somewhat greater default risk and more negative equity situations among low-equity homeowners