Have you noticed the recent shifts in home loan regulations? The interest rate hikes of 2022/2023 have had a ripple effect throughout the housing market, changing buyer demand and altering some of the regulations around mortgage lending.
Whether you’re a real estate agent or a mortgage broker, your knowledge of changing home loan regulations confirms your status as an industry expert and allows you to better serve your clients. So, in this article, we’re going to provide you with a cheat sheet of the key home loan regulations changes to watch in 2024. We’ll give you a heads-up on upcoming mortgage lending changes, and show you how to capitalize on these changes as you serve more homebuyers.
Regulation Trends
We’re seeing mortgage regulation trends intended to make homeownership more accessible for borrowers with lower down payment amounts and lower credit scores. Here’s a look at notable home loan regulation trends.
Lower Fees for Affordable Mortgage Products
The Federal Housing Finance Agency (FHFA), which oversees secondary mortgage market giants Freddie Mac and Fannie Mae, has continued its work to make homeownership more accessible. Here are the recent changes FHFA has made to home loan regulations:
- April 2022: Higher upfront fees for high-balance loans and loans for second homes. This is implemented to reduce the burden of government backing for loans that don’t need it. At the same time, this allows for additional assistance for borrowers with modest loans for primary residences.
- October 2022: Eliminated upfront fees for qualified borrowers of affordable mortgage products, offset by increased fees for cash-out refinancing.
- January 2023: Extension of the fee changes that were implemented in 2022 to reduce fees for borrowers most in need.
- May 2023: Lower fees for borrowers with lower credit scores. Borrowers with lower credit scores have traditionally been penalized by extra fees to help offset the theoretical risk to the lender. The FHFA is offering additional support to lenders so they can reduce the fees imposed on homebuyers with lower credit scores.
Lower FHA Mortgage Insurance Premiums and Higher FHA Loan Limits
As all FHA loans require mortgage insurance premiums (MIP), the cost of MIP is an important consideration for FHA borrowers. In 2023, FHA MIP costs were reduced from .85% of the loan balance to .55%. This move saves the average FHA borrower around $800 per year, making homeownership more affordable.
Additionally, FHA is increasing loan limits for mortgages backed by the Federal Housing Administration. FHA issues loan limits annually to prevent borrowers from taking on excessively high loans under this program. Each year, there is a mortgage limit “floor” (the limit that applies to the most affordable counties in the country) and a mortgage limit ceiling (the limit that applies to the most expensive counties in the country).
- For 2022, FHA’s nationwide mortgage limit floor for a one-unit property was $420,680, while the ceiling was $970,800.
- For 2023, FHA’s nationwide floor and limit have been increased to $472,030 and $1,089,300, respectively. This increase enables more buyers to purchase reasonably priced homes as home prices continue to increase across much of the country.
FHA Loss Mitigation
As we enter 2024, we’re still feeling the effects of the COVID-19 pandemic that began in 2020. The economic fallout from the surge in unemployment, followed immediately by the homebuyer frenzy that drove housing costs sharply up, severely shook the real estate market.
- COVID-19 Recovery Loss Mitigation Options have been extended through October 30, 2024. This includes loan modification options as well as home disposition options (such as pre-foreclosure sales, in which the property is sold for less than the loan balance, and Deed-in-Lieu of Foreclosure, in which the borrower can essentially give the property to HUD to be released from the loan obligations).
- Standard FHA Home Affordable Modification Program (HAMP) modifications, pre-foreclosure sales, and deed-in-lieu of foreclosure programs are all suspended through October 20, 2024. The COVID-19 Recovery Loss Mitigation Programs are taking the place of the standard programs in the meantime.
Key Regulations You Can Expect to See in 2024
For 2024, we expect to see recent trends in home loan regulations continue. This includes:
- Higher FHA loan limits. While the exact figures have not been published as of October 10, 2023, projections indicate that the floor and ceiling may go to $490,425 and $1,131,750, respectively.
- FHA loss mitigation extensions through at least October 30, 2024, perhaps longer.
- Mortgage rates calming down a bit. Industry experts are looking for rates between 5.4% and 6.8% in 2024.
What These Changes Mean for Homebuyers
In general, these changes give vulnerable homebuyers an extra boost of assistance. Homeownership may be more accessible than buyers realize, particularly for buyers who may be concerned about their credit history or may question their ability to qualify for a home loan. Additionally, slightly lower interest rates could mean lower mortgage payments for buyers.
How to Prepare Your Business for These Changes
Real estate agents and mortgage brokers alike can start preparing for these changes now. Here’s how:
- Educate yourself on mortgage loan options so you can inform your buyer leads. Keller Home Loans offers quick courses for real estate professionals who wish to learn more about mortgage options.
- Promote down payment assistance (DPA) programs for buyers who aren’t able to make a 20% down payment.
- Write newsletter articles, social media posts, and blog posts to explain the many home loan options available to today’s buyers. This type of “content marketing” serves to inform homebuyers while demonstrating your expertise and promoting your business!
Additionally, if you have prospective buyers who are concerned about their credit scores or down payment amounts, encourage them to connect with a local loan officer who can explain available home loan options and get them ready to buy.
How Keller Home Loans Can Help
Keller Home Loans is your source for ongoing real estate industry support.
Our competitive mortgage products give homebuyers options that suit their finances and their lifestyles. And, with our offer-ready pre-approvals, your buyers will be able to make an offer confidently, knowing that their finances have already been reviewed and pre-approved for a home loan.
Plus, with My Agent Station, you can watch your client’s loan progress in real-time as closing day approaches!
Be prepared for new home loan regulation changes in 2024 and beyond with Keller Home Loans!
