Banks that Offer interest only MortgagesBankers who only offer mortgages.
Banks in the country are still only lending at fixed rates.
Leading banks in the country said they would proceed to offer interest rate-only mortgages, mainly to the richest and most eligible borrower, despite new qualifying mortgages directive taking effect last weekend, National Mortgages News posted January 8. The Bank of America, JPMorgan Chase, Wells Fargo and Bank of the West have all indicated that they will maintain their policy of lending and holding only interest-linked credit, as high net value borrower defaults are very low.
Created by the Consumer Financial Protection Bureau, the qualifying mortgages regulation demands that banks fully record borrowers' capacity to pay back credit and make sure that mortgages do not cross 43 per cent of borrowers' income. Only interest-bearing mortgages do not fulfil the requirements for qualifying mortgages. Banks that have not yet provided pure interest rate lending are even considering entry into the markets.
"From an interest rates perspective, it's a fairly good asset for a banking institution and tends to be a strong premium product," Raj Date, former CFPB vice president and senior executive of Fenway Summer investments company, said to National Equity News. Only interest-bearing mortgages make up a small portion of the $250 billion unqualified loan estimate, which include variable interest rates on mortgages and fixed-rate mortgages for debtors with over 43 per cent borrower incomes ration.
Whereas the banks originally worried that taking out mortgages that did not comply with the new QM rules would subject them to higher statutory liabilities in the case of arrears, many creditors regard them as sound investment when granted to wealthy borrower who can make high down payment. For Wells Fargo, the banks will only offer credits that can prove that they are able to make the higher principal repayments and have at least $1 million in funds.
In the meantime, the Bank of America only provides interest-linked credit to those with FICOs of 720 or higher.