Five-Percent Mortgages and Stricter Standards: What’s in Store for Lending

What became a year of improvements continues to climb higher, including in Connecticut, where McCue Mortgage has two locations. Real estate in the southwestern region experienced growth in recent months, according to reports from the Stamford Advocate, with moderately-low rates attracting interest.

The Advocate’s assessment emphasizes rates that, while not the record-low percentages from earlier in 2013, have fluctuated between four and 4.5 percent since the summer. Locally, 15- and 20-year programs have attracted borrowers looking for even lower rates.

A running theme through the Advocate’s piece about Fairfield County real estate and through a CNN article about five-percent down payment mortgages is control, or specifically a market careful not to put borrowers in perilous conditions while still experiencing growth.

FHA mortgages partially spurred growth when the real estate market crashed in the late ‘00s, but now, with the government organization increasing its premiums and requiring insurance for the life of the loan, banks have created an alternative. Rather than the standard 20-percent down payment, these five-percent loans can be partially gifted (up to two percent) and require private insurance until the homeowner builds up 20-percent equity.

Although these two notions paint a positive picture for an industry that’s seen its share of falls and moderate rises over the past six years, January 10, 2014 sees the introduction of stricter lending regulations.

Dictated by the Consumer Financial Protection Bureau, the standards implement greater protections for borrowers and investors to avoid being stuck with risky loan products – ones that led to foreclosures in 2006. The two initiatives – Ability to Pay and Qualified Mortgage Rule – emerged early in 2013, and since that point, lenders unofficially began following these policies. The new standards will assist lenders with determining how well a borrower can re-pay a loan and with which programs prove to benefit consumers.