Credit Risk Rule Could Affect Boca Raton Home Buyers

New Risk Retention Rules Could Affect Boca Raton Borrowers

The FDIC, the Federal Reserve and several other federal regulatory agencies have proposed a new credit risk retention rule that would waive the 5% risk retention rule under Section 941 of the Dodd Frank law on qualified mortgages by requiring the borrowers to make a 20% down payment. Under the new rule, when making a non-qualified loan, lenders must retain a 5% ownership when the mortgages are packaged and sold to investors. Banks would have to have more capital for these non-qualified loans which means higher costs passed on to non-qualified loan borrowers. Borrowers who are unable to come up with the 20% down payment may not even qualify for a loan. The National Association of Realtors and the Banking industry oppose the rule because it would make it harder for middle class working families to save the down payment and achieve home ownership and the American dream. Real estate industry experts predict that the rule would have a negative impact on housing sales in states hard hit as result of the real estate bubble burst such as Nevada, Arizona and Florida where a large number of borrowers put down less than 20% down when buying a home. New home builders could be affected as well. FHA and VA loans are exempt from the rule. Proponents of the rule say that a borrower that is able to save a 20% down payment is more fiscally responsible.  The agencies are taking recommendations under consideration.

 If this rule passes, it will affect the types of mortgage products available to Boca Raton borrowers because conventional mortgage products that require less than 20% would eventually disappear. Rates for non-qualified mortgages may go up so Boca Raton mortgages could end up costing non-qualified borrowers more. Borrowers should take advantage of current mortgage products and low mortgage rates by purchasing a Boca Raton home now. To find out more about buying Boca Raton homes for sale, please contact us today.