Tag Archives: QM

Six federal agencies jointly released their proposed QRM rule that would require lenders to retain risk when selling mortgage-backed securities (MBS). The new proposal was created in consideration of the industry's response to the original proposal issued in 2011. That proposal required lenders to keep a stake in the loans they sold in which borrowers were spending more than 36 percent of their income on payments and in loans with down payments of less than 20 percent. Under the new proposal, the 36 percent income threshold has been raised to 43 percent, and the revised rule also eliminates the down payment requirement.

The positive indicators seen in housing markets across the country are not a mirage but a true recovery, according to RealtyTrac VP Daren Blomquist and a panel of six real estate professionals who spoke during a roundtable discussion Friday. RealtyTrac ranked 100 markets in terms of recovery and found a smattering of markets from all regions in the top 20. Blomquist said the defining factors for where a market landed on the ranks were location and employment.

From new regulations to increasing fines, financial institutions--both large and small--reported feeling more squeezed by compliance and risk management pressures since the start of the year, according to survey results from Wolters Kluwer Financial Services. In January, the Indicator began with a baseline score of 100 after the company surveyed 400 banks and credit unions. After surveying 430 similar institutions in April, Wolters Kluwer Financial Services reported a score of 136.

While originations are down across the board, ""[t]he drop in originations has been most pronounced among borrowers with lower credit scores,"" said Federal Reserves Governor Elizabeth A. Duke. From 2007 to 2012, purchase originations among borrowers with credit scores higher than 780 declined by 30 percent. In contrast, purchase originations for borrowers with credit scores between 620 and 680 declined by 90 percent, and originations among borrowers with credit scores below 620 were ""virtually nonexistent,"" according to Duke.

A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve's current policies could lead to another housing bubble. Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed's monetary policy that is keeping mortgage rates down. However, 48 percent see the Fed's policies as ""a little risky,"" and the remaining 48 percent categorized the risk as ""moderate to high risk."" Experts also expect prices to end this year 5.4 percent higher than their level at the start of the year.

The Federal Housing Finance Agency (FHFA) has directed Fannie Mae and Freddie Mac to limit future loan purchases to those that meet the Consumer Financial Protection Bureau's (CFPB) criteria for ""qualified mortgage"" loans. In a release, FHFA said that beginning January 10, 2014, the GSEs will no longer purchase loans subject to CFPB's ""ability to repay"" rule if those loans are not fully amortizing, have terms of longer than 30 years, or include points and fees in excess of 3 percent.

As part of its ongoing efforts to assist the industry in the implementation of new mortgage guidelines, the Consumer Financial Protection Bureau (CFPB) issued proposed amendments to address questions and clarify the qualified mortgage (QM) and servicing rules first laid out in January. The proposal addresses five topics, including debt-to-income ratio concerns surrounding the Ability to Repay Rule, uncertainties around the temporary QM provision, and which criteria are used to define ""small servicers.""

As the industry prepares to implement the Consumer Financial Protection Bureau's (CFPB) new ability-to-repay rules, Federal Reserve Governor Elizabeth Duke warns new consumer protections may come at a cost to the industry as lower-quality-credit borrowers are precluded from the housing market. As the broader economy continues to improve, household formation will increase, according to Duke, ""but if credit is hard to get, these will be rental rather than owner-occupied households.""

In an article released March 3, Edward Pinto and Peter Wallison, two fellows at the American Enterprise Institute (AEI), assert that the QM rule is ""simply another and more direct way for the government to keep mortgage underwriting standards low."" While the two authors acknowledge that the rule's provisions--described by them as ""draconian""--would ""probably have addressed the problem of low underwriting standards,"" they say the lack of down payment or credit history requirements doom it to failure.