Other changes include that the “Owners Title Policy” (usually a seller paid cost) will show up on the buyer’s GFE (and will be very confusing for buyers…just know to subtract that amount, but it must now be disclosed). Also, the escrow officer in charge of preparing the documents for signing and recording must now compare the original GFE to the final HUD closing document to make sure they are in line.

Just know that you will want to compare both the GFE and the summary to get a true picture of which loan would fit your needs.  This is simply another example of the pendulum swinging (and, perhaps, occasionally “over-swinging”) to compensate for the former “loosey-goosey” lending practices that helped propel us into this new era of real estate.  Sighhhhhhhhhhhhhhhhhhhhhhh!  However, the good news is these new regulations will force marginal Mortgage Brokers to stay the course on fees.

The Portland Oregon real estate market has, thus far, been spared some of the losses suffered by other areas of the country.  None the less, our market has taken a hit.  Some homeowners have decided that other priorities motivate them to make a move despite the fact that attempting to sell their home may be a challenge in the present market.  Perhaps the challenge is that they haven’t owned it long enough or they’ve taken 2nd mortgages or lines of credit on the property.  Whatever the circumstances, the numbers just don’t work, but that can’t or won’t deter them from their goal.  Many of these homeowners would like to convert their present residence to a rental property instead of selling.  With so many former homeowners coming back into the marketplace as renters, the local Portland rental market has been good and rents were rising through 2007/2008.  Although, I’m noting a bit of a slow-down probably due to the sheer numbers of residences being converted to rentals.  This conversion process of a present principal residence to a rental property, as an alternative to selling, while trying to purchase a new home has been complicated lately by the lending requirements. 

The most stringent new rule requires borrowers to have a reserve amount set aside equal to six months of principal, interest, taxes a insurance (PITI) payments when converting the primary residence to an investment property.  The restrictions placed on the departing property (the one to be rented) (30% equity, 6 months of reserves, signed lease agreement and copy of cancelled security deposit check) are ONLY necessary if the buyer needs to use the proposed rental income in order to qualify for the new mortgage.  If the buyer has enough income to carry the payments on both properties and still be below the debt ratio threshhold, then those criteria don’t apply. The only requirement would be the 6 months of reserves for the rental property. Real Estate Resource is now handling rental properties for our clients, please call if we can be of service!