New Mortgage Escrow Rules for January 2014

New Mortgage Escrow Rules for January 2014

Nearly three years after passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act ,  a response to the mortgage crisis of 2007-2008 that has left millions of Americans licking their financial wounds from foreclosures and short sales; new escrow rules are published today that will go into effect January 1, 2014 and will  impact those who have a “higher-priced mortgage loan”.

Download the 2014 Consumer Mortgage Escrow Rule  Summary
Download the Consumer Finance Protection Bureau  Escrow Rulebook
Download the Consumer Finance Protection Bureau Escrow Rulebook

Specifically, the rule written by the Consumer Financial Protection Bureau (CFPB) created by Dodd-Frank amends existing regulations that require creditors to establish and maintain escrow accounts for at least one year after originating a “higher-priced mortgage loan” to require generally that the accounts be maintained for at least five years. – See more at: LoanSafe.org

The question, however, is what qualifies as a “higher-priced mortgage loan”? With the implosion of the sub-prime mortgage market in 2008, there has been very little private equity return to this space. Because real estate has yet to significantly stabilize and new government regulation makes it too costly to reenter this market, would be investors of Non-Conventional Loans have opted instead to invest in sub-prime auto loans which may be why the auto-industry is surging where real estate is still sagging.

Is there a legitimate place for responsible NON-prime Lending?

While much has been widely reported on the sins of the sub-prime lenders, very little has been told about Americans today who can’t buy a home today due to heightened credit criteria due to the low margins available to lenders because of the protracted period of historically low mortgage interest rates.

As a result, in Raleigh-Cary North Carolina, if you have a job, pay your bills on time, have a down-payment but have a FICO credit score sub 620, access to Conventional , FHA or VA financing is virtually non-existent. Non-Conventional Lenders could responsibly fill those needs by making loans to people who are otherwise credit worthy but can’t meet the higher credit standards demanded by banks today;  Just a thought.

It appears, at least to this Raleigh Mortgage Lender, this is yet another example of far reaching government legislation which will only cause more barriers to home-ownership than it reduces.

Ricardo Cobos is a licensed mortgage loan officer  in Raleigh-Cary-Durham North Carolina who has been helping families achieve financial security through responsible home-ownership since 1998. (919) 526-0183