Qualified Mortgage

The government has impacted other facets of the lending industry, of course. Since the mandate went live on Jan. 10, 2014, qualified mortgage might be the most talked about government policy in the lending industry.

As we reported in January, the Consumer Financial Protection Bureau’s (CFPB) new standards simply ensure that bad loans will not be issued. A client’s debt-to-income ratio must not exceed 43 percent, though lending professionals will try and work with buyers who are just over the limit. Murgatroy inquires about any compensating income, be it from a girlfriend or boyfriend, or perhaps from a hobby they wish to keep private, such as gambling.

“I’ve been doing this 15 years, and I always want to make sure people can afford a house and qualify,” Murgatroy says. “I don’t want to push someone into a house, and then something goes wrong and they lose it.”

Qualified mortgage standards are there to ensure that doesn’t happen, too. However, the guidelines aren’t expected to deal a crushing blow to the industry, like some feared.

In fact, lending professionals say they learned their lesson from the crash, and they have already implemented strict standards. Guaranteed Rate released a report in December claiming that 99.4 percent of the mortgages it approved in the past 18 months met the qualified mortgage standards. The idea, then, that the new standards will force scores of buyers to retreat from the market is a bit misleading.

“We’ve simply been told in black and white writing the things that make sense and that we frankly have already been doing,” says Perez, who suggests a real impact of the standards will be more paper work. “The microscope is bigger, and there are extra layers of verifying and documentation, which might cause longer time frames for closing.”

Another government policy to track in 2014 is the Mortgage Forgiveness Debt Relief Act (MFDRA). Passed in 2007, the act mandated that homeowners would not be charged income tax on any debt forgiven by lenders. When the act expired Jan. 1, 2014, that money again became taxable income. Congress is discussing a renewal, according to Reuters. Many in the lending industry would welcome a renewal, as it can help many homeowners who are still struggling.