With 2015 almost upon us, your action items for the year are surely in place. But here’s one to consider adding near the top of your list: educating potential homebuyers about some major shifts in lending practices.
Housing policy announcements in October were good news for first-time borrowers and those with lower incomes who might have been sidelined by tightened lending practices in recent years.
The primary announcement was the final Qualified Residential Mortgage, or QRM, rule. Regulators decided to eliminate the highly controversial requirement of a specific down payment amount, bringing the rule in line with the Consumer Financial Protection Bureau’s existing Qualified Mortgage, or QM, rule. The latter was designed to protect borrowers from predatory lending practices.
What does this mean for your clients? In part, it means they don’t have to fear being rejected outright for a mortgage if they don’t have tens of thousands of dollars saved up for a down payment. And this brings me to another victory for housing: Fannie Mae and Freddie Mac are considering allowing borrowers with less-than-perfect credit profiles to obtain loans with a down payment as low as 3 percent by considering “compensating factors.”
Additionally, Fannie and Freddie also plan to loosen demands on lenders to buy back defaulted mortgages, creating more stability, confidence and clarity for the lending industry. This ultimately encourages lenders to issue more loans to first-time buyers and those who might have faced hard financial times during the recession.
These developments are great news, and positive steps forward, building a reasonable, more measured approach to lending practices. The end result is a more level playing field for potential borrowers. The dream of homeownership is still alive and well for many Americans—and that dream should be very attainable.
As REALTORS®, it’s our responsibility to give our clients all of the facts and ensure they understand what’s changing in the market—including the lending arena—so they can make informed decisions when it’s time to buy or sell.
Your value as a real estate agent extends well beyond knowing local neighborhoods and how to negotiate a good deal. You can really stand out as knowledgeable and an educator to your clients when these kinds of complex issues are considered. Many buyers may still think they need 20 percent down and pristine credit in order to qualify for a loan. Some might think the market is still inundated with distressed properties. They don’t know what they don’t know, and it’s up to you to tell them. It’s that simple.
So as you fine-tune your strategy for the year ahead, make homebuyers aware of this good news everywhere you can. Post it on social media, share it in a buyer seminar, mention it in the coffee line, or put it in a quick email with a link to a relevant news story. Information is power, and being a go-to resource puts you in the driver’s seat of your business.
Margaret Kelly (CRB) is chief executive officer of RE/MAX, LLC. For more information, visit www.remax.com.
