The ability-to-repay and qualified mortgage (QM) rules that went into effect earlier this year are not having a significant impact on approvals of prime conforming residential mortgage loans, but they are impacting the jumbo and nontraditional loan markets, according to the July 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices conducted by the Federal Reserve.
Meanwhile, the Fed reports, credit standards continue to ease at major lending institutions.
Most large banks reported that because of the safe harbor for loans that meet GSE standards, the ability-to-repay/QM guidelines are not having a major impact on their approval rates for prime, conforming loans. However, "a more substantial share of other respondents" reported their approval ratings are lower due to the new industry rules.
While 77.8 percent of large bank respondents said their approval ratings for prime residential mortgages is "about the same" as it would be without the new rules, 47.1 percent of other banks said the same is true at their institutions.
In particular, jumbo loans and nontraditional are being impacted by the new rules, according to the Fed's survey results. More than half of survey respondents said these two types of loans are at least "somewhat lower" than they would be without the new rules.
The two pieces of the ability-to-repay and QM rules that are most impacting approval rates, according to the Fed, are the mandatory assessment of credit history, assets, and debt payments; and the debt-to-income ratio cap of 43 percent.
Overall, banks reported easing credit standards for residential home loans. However, standards for nontraditional loans and home equity lines of credit (HELOCs) remained about the same.
Many banks also reported that despite easing credit standards, their standards remain stricter than their institution's long-term average.
Demand for residential loans increased for the first time in one year, and demand for HELOCs increased for the first time since October 2013, according to the Fed's survey.
Credit standards for commercial real estate loans is also easing at most banks and are now below their long-term average standards at some institutions, according to the Fed.