Mortgage Loan Application Process – Changes To Mortgage Loans
The mortgage industry and lax lending policies are regarded as the main cause of the global recession. The Obama Administration implemented reforms that have led to more stringent and transparent lending practices.
Applications for mortgage loans must now comply with full disclosure statutes and all financial information from applicants must provide written documentation to support income and expense transactions.
As of September 30, 2011, the government backed mortgage limit for High Cost Area (HCA) loans decreased from $729,750 to $625,500. That means that for jumbo mortgage loans, the government will only back the first $625,500. The remainder of the mortgage loan will come from the lending institution. The borrower will now be required to have at least a 20% down payment. The government has also mandated more standardized appraisal practices.
The object of this limit is that every entity in the jumbo loan chain has skin in the game. The concept is to encourage more responsible mortgage loans and more structured borrowing practices.
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