ROCKFORD (WIFR) -- For the first time since the housing bubble burst, Rockford area realtors say they've seen a considerable spike in home sales. 2012 marked the first year over year increase since 2007, and perhaps even better news for home-owners, property values are on the upswing. The three-month rolling average is now over $100,000.
To help the housing market continue to improve.. There's a new mortgage protection plan in the works. The new rules could make it a little tougher for people to get a mortgage.
The consumer financial protection bureau unveiled the new rules today. The main goal is to make sure homeowners can afford to repay loans to avoid foreclosures.
The rules mean more restrictions for lenders. They must limit increasing teaser rates.. And large balloon payments that are made at the end of a loan. There's also a ban on "interest-only" loans.. As well as "no documentation" loans. That means banks still have to verify a borrowers' financial records... Something they didn't start doing until a few years ago.
"One of the best examples I can give you of that, is one of the companies that's no longer in business, did a loan for a lady in California that made $10/hour working part-time as a security clerk, lived in a homeless shelter. They allowed her to purchase a $480,000 home with no money down,” said Ron Balsam, Senior Vice-President of Real Estate at Alpine Bank.
As another part of this plan to get a mortgage, it’s suggested that a borrower’s total debt isn’t more than 43% of their annual income, including student loans and credit cards. The new standards are a little tighter than the current 45% figure, but it’s a lot different than a few years ago, when a borrower’s debt could be as high as 65%.
This plan won’t take effect until next January and some of the rules will be phased in over a 7-year period. That will depend on whether loans are already meeting separate federal standards.