Dodd-Frank Laws To Be Repealed by Trump. Should Encourage Home Purchases

Back in January 2015, the Dodd-Frank banking and lending laws were enacted by the Obama administration and implemented into the Real Estate industry nationwide as a way to reel in the lackadaisical practices that led to global financial meltdown of 2008.

dodd-frank-semper-find-my-home-blogTo say that that it was a knee-jerk overreaction to a problem that did exist would be putting it mildly.  Instead of applying thoughtful, just and practical solutions and laws, it swung the pendulum so far the opposite way that it restricted and strangled money lending and the procedures associated with them.

Of course, regulations are always the answer right!  The law also created the Consumer Financial Protection Bureau (CFPB).  The Trump administration has vowed to dismantle the Dodd-Frank Act and replace it with policies to encourage growth and job creation.

The Trump administration has a blueprint to replace Dodd-Frank called the Financial Choice Act and while it won’t replace the original act, what it will do is ease some of the restrictions it has had on people borrowing money to purchase new homes.

As a realtor here in Phoenix to Veterans and First Responders, many who are first time home buyers, have been unable to purchase a home because they can’t quality due to Debt To Income issues, or other disqualifying reasons that wouldn’t have been there prior to Dodd-Frank.

We view this as a positive step to revitalizing money lending which will create jobs and enable more first time home buyers to get a slice of the American dream.

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FHA Cuts Mortgage Insurance Premium, Good News to Home Buyers


For many homebuyers looking to buy a home, the last several years has been a mixture of both blessings and curses. On the one hand, interest rates have been at an all time low, yet on the other, the newly enacted Dodd-Frank lending practices have made lending money far more stringent. Yesterday though, the FHA cut mortgage insurance premiums for the first time since 2015 and this is good news.

The FHA announced it was cutting their annual mortgage insurance from .85 percent to .60 percent. What does that mean for the average buyer? It is a key step in helping low, moderate and first time homebuyers get into homes.

Recently, though, the high cost of mortgage insurance has put home ownership out of reach to many. While FHA mortgages represent a low down payment option for buyers, the additional insurance requirements priced many young and first-time homebuyers out of the market.

It really becomes a simple question of math. Every time mortgage insurance rates are cut means the borrower meets the debt-to-income ratios or (DTI) required by Dodd-Frank laws.

The FHA and Department of Housing and Urban Development took an important step in making home ownership the American dream again. The FHA is being asked by many in the real estate industry to next eliminate “life of loan” mortgage insurance.

This means borrowers are required to maintain mortgage insurance on an FHA-insured property regardless of their equity position, while borrowers with traditional mortgage insurance can typically extinguish their mortgage insurance once they reach 20 percent equity in the property.

Here in the greater Phoenix area, a market that’s been named #1 in the nation for homeownership in 2017, this is great news and a program we will be utilizing for our buyers and borrowers moving forward.

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How Can a Veteran Improve Their Chances of Getting a VA Loan?

I’m often asked by friends of mine who are veterans to help them out during the process of purchasing their home. I actually just helped a veteran here in Phoenix, Arizona with a  VA Jumbo loan and we both learned something new during his lending process.

Remember fellow veterans, your VA home loan depends a lot on your Debt To Income ratio, more commonly known as DTI, and just like regular loans they determine whether or not you qualify and for how much. Take a look heveterans-day-ceremonyre at how it’s determined.

Dodd/Frank laws that came into effect in 2014 dramatically changed the lending process and landscape for the entire industry.  They now require lenders to ensure borrowers the “ability to repay” a mortgage.  DTI ratios and other criteria have made qualifying for a loan a lot more stringent and difficult. Gone are the days of NINJA loans…..remember those?  No Income No Job/Assets?

The acceptable Debt To Income ratio for a VA loan is 41% and credit plays a huge factor. I’ve seen personally a veteran who was approved for a loan with a DTI ratio in the 60% range, however, the underwriter has to explain the reason behind approving the loan.  Not to say it can’t be done.

So veterans, just because we’re entitled to a VA loan doesn’t mean we’ll be approved for one. Work with your Realtor® who probably has excellent relationships with lenders.  At Semper Find My Home we work with the Belmont Group, Matt Belmont happens to be a fellow Marine Veteran  who works closely with all my clients to ensure we maximize your experience and utilize your VA benefits to their fullest, he’s awesome!

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