This morning you may have received an email from me that I had no knowledge about. The list of people who received it came from my contact list off one of my social media pages. Please disregard and delete it, and I am truly sorry if this caused you alarm. My team at PRMI is in contact with the social media site to rectify this “hack” of my contact list so it doesn’t happen again.
At PRMI, we are excited about the long-awaited arrival of the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage/Ability-to-Repay rules (QM). We believe these new rules will allow us to help even more Americans pursue the dream of home ownership now that we have a clear line drawn in the sand of what is considered a quality (QM) and non-quality (non-QM) mortgage based on CFPB interpretation of the Dodd-Frank Financial Reform Act. By distinctly separating the two categories of mortgage-transactions based on consumer borrowing criteria, the new Qualified Mortgage rules will play a significant role in the interest rates and fees a consumer will recognize in the mortgage shopping process.
Most mortgage lenders will largely focus on serving QM borrowers, or only those who meet the more stringent government lending criteria. At PRMI, we see an opportunity to better serve all customer needs by providing products to consumers who don’t necessarily meet the QM standards, but who may still be able to demonstrate the ability to perform and repay a mortgage utilizing a Non-QM solution that properly considers their unique circumstances.
The QM rules were put into effect as a preventative action to protect against another housing finance crisis like the one that began in 2008. It also provides mortgage lenders legal protections from being sued by the consumer for extending a loan on which they are not performing when QM standards are met. Although the QM rules will have an impact on the industry by tightening the loan restrictions, it is my belief that Non-QM products will play an important role in the strengthening of the broader housing market, as new products allow for a greater number of consumers to access credit. In fact, the lack of mortgage-credit options today has been one of the major roadblocks preventing the housing market from a achieving a complete recovery.
Allow me to illustrate the limitations created by QM with a real example. After the housing meltdown, the loan qualification requirements tightened to the point where some well-deserving consumers were completely unable to qualify for a housing loan. For example, a consumer with a 760 credit-score, 30 percent down and seven years of successfully running a business found it much more difficult to get a loan than a consumer with a 600 credit score, 3.5 percent down and twelve months on the job. What’s the reason behind this discrepancy? The first consumer had written off too much of his/her income as a self-employed borrower (depreciation, investment in equipment, thus bettering the business, etc.), and in doing so reduced their adjusted gross income (AGI) to a point at which they don’t meet new income qualification requirements. But where did all of the money for such a large down-payment come from in the first place? Their hard work in operating a successful business! We can clearly see that a more in-depth investigation of the first consumer’s financial characteristics may very well prove him/her to be a less risky borrower. It certainly seems reasonable that this consumer shouldn’t be prevented from accessing mortgage credit.
With Non-QM, lenders will now have the ability to build new products to better serve their customer’s specific and unique needs. We will be able to offer more loan options to those who fall outside the stringent criteria of the QM realm (Although, Non-QM loans are still evaluated to ensure that the borrower has the ability to repay).
Living in a QM world does not necessarily limit the lending options as much as some naysayers have feared. The new rules do not condemn the mortgage industry to an atmosphere of negative growth and minimal risk-adjusted profitability. On the contrary! Regulators have afforded us the opportunity to establish a robust lending business in a significant part of the market—one that has been undeserved in recent years. If implemented responsibly, judiciously and with the protection of the consumer and the U.S. taxpayer in mind, I believe lenders can both properly serve credit-worthy consumers, and in so doing, restore the strength of the housing market that is critical to overall economic growth.
PRMI is gearing up to provide more options for consumers, including private mortgages that fall outside the QM definition. Although 98 percent of the loans prepared by PRMI fall into the QM category, the Non-QM loans offer exciting possibilities. In time, I believe the Non-QM loans will be as relevant and common as the FHA, VA, Freddie Mac and Fannie Mae. Regardless, I feel that these changes will inspire exciting debates among mortgage professionals and consumer advocacy groups over the next few years.
I remain positive and optimistic regarding the future of the mortgage and real estate industry, and the opportunities that these new rules bring. It is time that we put the consumer first. In achieving that, we need to deploy new ways to safely provide financing options that fit the broader market and the many unique needs of the individual home buyer.
In today’s fickle real estate market, it can be intimidating to approach home ownership. As trends come and go in real estate, there have been many changes to the industry. However, one thing has remained true—winter is a great time to buy a home!
Winter, particularly December and January, can be a less than ideal time for house hunting. There are fewer houses on the market, the days are short and the outdoor temperatures are cold and unpleasant. However, homebuyers will find many benefits during the winter that they will not find during the busy spring months.
Fewer offers are made on homes during the winter months. When selling a home during the winter, one must consider either letting the home sit on the market until spring (which can seem really far away) or doing what it takes to sell now. Therefore, incoming offers can be more aggressive in the winter. Sellers who keep their homes on the market during the holidays are incredibly motivated.
You will also find less competition from other buyers in the winter. That can make a big difference when it comes to getting a home that you truly want at a price that you are willing to pay.
Another bonus to buying in December is the tax savings. Closing on your new home by Dec. 31 means that you can deduct mortgage interest, property taxes and points on your loan from your income tax return. These deductions can be significant. This is especially true in the early years of your loan when you are paying off a large amount of interest.
Winter also brings perks when it comes to working with a lender. Although lenders work diligently year around to provide the best service, fewer contracts are issued during this time of year. Therefore, it is possible to speed up the process during the winter and help clients cross the finish line to home ownership faster. Speed can work to your advantage when making an offer. In some cases, the speed at which one acquires financing can make the difference between an offer being accepted and an offer being declined.
The New Year is approaching fast and this is a great time to consider home ownership in 2014. There is no reason to wait and begin your search in the spring. Purchasing a new home could be the best holiday present for yourself and your family. It is definitely a great investment in your future.
As the next generation of consumers, Millennials (also known as Generation Y and the New Boomers) have become a driving force in the housing market. It has been interesting for me to discover that this rising generation is driven by a different set of values and priorities than we have seen with Gen X homebuyers and Baby Boomers.
Gen Y (typically categorized as born between 1980 and 2001) is truly a product of their environment. Because Millennials came of age during turbulent economic times, they saw the values of family homes plummet. It is also significant that Millennials grew up with the Internet. They crave information and are deeply in tune with the many options available to them. They are open to diversity and have the tendency to evaluate decisions through social media. Millennials also seem to have an almost universal green streak. Having a healthy work/life balance is a big priority.
Therefore, it is no surprise that Millennials prefer to purchase homes in city centers and urban neighborhoods. Cookie-cutter suburbs hold little appeal. Millennials refuse to waste valuable time commuting. They have a desire to live in walkable neighborhoods, with access to public transportation, near work, friends and entertainment.
City living feeds the Millennial’s desire for an urban lifestyle, but it also provides peace of mind. Homes in city centers consistently hold better value than homes in the suburbs. Additionally, the lessening demand for suburban living will help decrease urban sprawl and reduce the strain that commuting places on the environment. These factors feed the Millennials’ desire for “green living.”
This is why industry experts have come to call Millennials the first Smart Growth Generation in America. The goal of Smart Growth is to build communities with access to public transportation and reduce the distance between housing, jobs, shops and schools. Smart Growth has led to the transformation of cities across the nation.
Leading the charge is Smart Growth America, an organization responsible for building accessibility, sustainability and livability into city policies. Efforts include increasing bike lanes, building walkable communities and increasing public transportation. If this trend continues we should see the revitalization of city centers across the nation. The home buying habits of Gen Y continues to drive this movement.
Even though Primary Residential Mortgage, Inc. is a nationally known mortgage lender, we believe strongly in the responsibility we have as stewards for our local community. We continually encourage our employees and Branch Partners to give back to their local communities through fundraising, service projects, and working with local outreach organizations.
To that end, Primary Residential Mortgage, Inc. has started working with the West Point Community Council in Salt Lake City, Utah. Our new/future corporate headquarters is located within the vicinity of this local Community Council and we are excited to serve to our local community.
Community councils are made up of local residents who weigh in on projects and concerns within their local area and make recommendations to their city council. City councils are the overseers of the city’s budget. Here in Utah, the Salt Lake City Council is an important branch of city government whose main tasks are the adoption and oversight of Salt Lake City’s annual budget. Their other responsibilities include introducing legislation, setting city policy, and giving advice and consent on appointments made by the mayor to city boards and commissions.
Community councils are vital to the growth and sustainability of local neighborhoods. Community council members volunteer of their own free time and are very invested in making their neighborhoods better places to live. It’s important that we as corporate members of our communities make sure we are doing everything we can to show our support and investment as well as utilize our resources—be it time, people, or money—to help better the communities in which we live.
I am continually amazed and encouraged by the involvement we as a company have in each of the local markets in which we reside. From sponsoring little league teams to cleaning up local parks to participating in community councils, Primary Residential Mortgage, Inc.’s employees and Branch Partners know what it means to be true corporate stewards and I couldn’t be more impressed and thankful. We look forward to our future involvement in the West Point Community Council and are excited to hear what others are doing to give back where they work and live.