Just like debit card fees are rising, mortgage rates are also likely on the rise. Regulators are trying to meet an April deadline to finalize the new mortgage requirements that could be devastating to not only lenders but also borrowers.
Required Down Payment
The topic of debate right now centers on how much borrowers should be required to put down as a down payment for what is being characterized as less risky mortgage assets. These less risky mortgages would not require the lender to retain 5% of the loan under the recently passed Dodd-Frank law. This 5% risk retention requirement was passed in an effort to ensure that banks have skin in the game which in turn would limit the predatory lending practices that occurred prior to the recession.
How Could Mortgage Rates Go Higher
In the case that the lender loans mortgages to a borrower without meeting the minimum down payment requirement amount (20% or 30% down) that lawmakers are currently debating, then the lender would be required to retain 5% of the loan if it is securitized. Those loans would be costly to the lender because they would have to retain 5% of the loan. As you might expect, the lender would then pass that cost onto the customer in the form of a higher mortgage rate.
More Mortgage Questions?
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