There’s always a lot going on in the world that impacts mortgages, with global and national news popping up throughout the year to surprising effect — both positively and negatively. But at the outset of 2018, here are the 5 major mortgage trends sure to have an impact.
#1 Tax Reform and Jobs Act of 2017
The new Tax Reform bill was signed into law by President Trump on December 22, 2017, but the impact it may have on mortgages and real estate in 2018 is a hot topic of speculation. The new law lowers the deduction for mortgage interest write-offs from $1million to $750,000 on mortgage loans obtained after Dec 14, 2017.
Further changes in the law are the elimination of the deduction for interest on all home equity loans, obtained after Dec. 14, 2017, and property tax expense will be capped at $10,000 maximum deduction.
The full details of the tax reform law, discussed in my blog post may impact consumer borrowing decisions beginning in 2018.
Will this, in turn, negatively impact high-cost real estate markets, like the SF Bay Area, in the future?
#2 Change in the Conforming Loan Amount Limits for 2018
Every year, the Federal Housing Finance Agency (FHFA), reviews and adjusts the baseline conforming loan limit based on the change in the average US home price, per the Housing and Economic Recovery Act (HERA). This applies to loans lenders can sell to Fannie Mae and Freddie Mac after the loan has closed.
The changes for 2018 increase the conforming loan amount to $453,100 and, for counties with higher cost housing, the new “high balance” conforming loan limit is increased to $679,650. For more details, check out my blog post that shows the limits for Bay Area and California counties, how to find loan limits across the country, as well as the new limits for 2, 3 and 4 unit properties.
#3 Change in the FHA Loan Amount Limits for 2018
The Federal Housing Administration (FHA) also announced new loan limits for loans eligible for mortgage insurance coverage by FHA.
In short, the FHA national low-cost area mortgage limits are set at $249,515 for a one-unit property and, in high-cost areas of the country, the ceiling will increase to $679,650 from $636,150.
Click here for full details on the new FHA loan limits for low cost and high-cost loans across the US.
#4 Technology, Technology Everywhere
Once lenders had the chance to take a pause from the regulation onslaught of the last 7 years, they turned their collective attention to technology. Early adoption was primarily technology that improved back-end loan processes, managing compliance and regulations.
Now, lenders are focusing on improving the consumer loan experience via technology. Creating a digital loan, from application to closing, has become the norm. Studies by JD Powers show 43% of customers applied for a mortgage digitally in 2017, up from 28% in 2016.
The digital loan process starts with an application completed on a computer or mobile device and allows for automated appraisal and title services, disclosure delivery and electronic signatures. What will become more prevalent in 2018 is the use of an automated asset and income verification, and the use of smartphones to take pictures of documents that can be integrated into the loan application.
The ability to have a complete “eClosing” rests on one last piece of the puzzle falling into place. Technology now exists allowing for a virtual Notary, via FaceTime or Skype sessions, with borrowers. It may be aggressively integrated into all digital mortgages by this year.
#5 Less Consumer Oversight
The Trump Administration’s commitment to decrease regulations included the Consumer Financial Protection Bureau (CFPB), which became more of an immediate reality when Director Richard Cordray resigned at the end of November 2017.
The acting Director, Mick Mulvaney, has changed the mission statement of the CFPB to emphasize its commitment to deregulation, and is predicted to address “the excessive complexity of mortgage lending requirements.”
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