6 Mortgage Investment Changes to Expect in 2016
With a new year the mortgage industry will be seeing new products rolling out, as well as new rules for private-label securitization. Here are 6 changes you should expect to see in mortgage investment:
- Increase in collateral requirements. As of December 24, 2015, private-label residential mortgage-backed securities are required to retain a minimum of 5% of deal collateral credit risk. The only exception is for those loans that meet the criteria for “qualified residential mortgages.”
- Increase in loan limits for 39 counties. The Federal Housing Finance Agency will raise loan-purchase size limits in 39 counties for Freddie Mac and Fannie Mae. Additionally, there will be an increase in limits throughout 188 counties for Federal Housing Administration loans that serve as collateral for Ginnie Mae.
- Increased flexibility for GSE modification. Beginning March 1, 2016, servicers no longer just use the outstanding principal balance to determine eligibility for a Freddie or Fannie standard or streamlined modification. Servicers must not calculate a borrower’s full mortgage obligation. In addition to the outstanding principal balance, this will include past-due interest and any other outstanding payments that may be due.
- Collection of more credit data. Starting midway through 2016, Fannie Mae will begin to require loan sellers to use more-detailed credit data. This will include the use of utilization rates over time rather than static data on payments and balances.
- Electric filing requirements. Though the date on this requirement is yet to be solidified, Fannie Mae and Freddie Mac will require mortgage sellers to submit closing disclosure data electronically. The intent is to begin collecting this data by the fourth quarter of the year with the possibility of making it mandatory sometime in the year 2017.
- Fed hike puts upward pressure on rates. Supply may be constrained due to mortgages being less affordable for consumers. Higher rates may cause a possible increase on the yield on lenders’ typical investments.
In addition to these changes, the industry should be seeing the growth of additional options for accredited investors.