Tag Archives: QRM

One of the biggest provisions of the QM rule is the newly set Ability-to-Repay rule, which demands that all new mortgages comply with basic requirements to protect consumers from taking on loans they can't repay. The rule does away with so-called ""no doc"" and ""low doc"" mortgages, requiring that all of a borrower's pertinent financial information must be supplied and verified. The Ability-to-Repay rule also stipulates that lenders base their evaluation of a consumer's ability to pay on long-term views, discounting ""teaser"" or ""starter"" rates typically used in the introductory period.

While the mortgage market continues its slow trod toward recovery--with distressed liquidations and delinquencies on the decline--industry participants await the final word from lawmakers on one key issue affecting the future of their businesses. The Consumer Financial Protection Bureau has expressed its intent to announce its final decision on what constitutes a qualified mortgage this year. This, in turn, will give the industry some insight into what can be expected to define a qualified residential mortgage (QRM), according to Fitch Ratings.

Even though President Obama and Governor Romney were criticized for evading housing issues when running for president, Clear Capital asserts the ""sprint"" in housing still spoke positively for Obama and assisted him in his recent re-election. But, now that Obama has won a second term, his administration is charged with leading phase two of the housing recovery, and this will happen by collaborating with the industry to reduce regulatory uncertainty, according to a Clear Capital report.

Americans have lost $7 trillion in home equity in the past five years, and nearly 12 million homeowners are currently underwater. The Progressive Policy Institute says these issues deserve just as much attention in the upcoming presidential election as the issue of unemployment, and in a January report, the institute offers a few suggestions to improve the housing market and ultimately, the economy at large, including shared appreciation mortgages and down payment savings accounts for first-time buyers.

While the government has recently enhanced its efforts to fight mortgage modification scams, mortgage fraud remains a prevalent issue throughout the industry. According to Jenny Brawley, associate director of mortgage fraud investigations for Freddie Mac, three elements drive mortgage fraud schemes: pressure, opportunity, and rationalization. The FBI characterizes mortgage fraud schemes as ""particularly resilient"" and credits them with being able to adapt to economic changes and modifications in lending practices.

Data released by Lender Processing Services (LPS) Thursday indicates foreclosure and delinquency numbers are on the rise again. The company says foreclosures were initiated on 217,486 loans in June, up more than 10 percent from May. The national delinquency rate also increased to 8.15 percent. As a supplement to this month's report, LPS examined its historical data and found that nearly half of all loans originated in the U.S. since 2005 would not qualify as a Qualified Residential Mortgage (QRM) under regulators' current proposal.

An independent study conducted by Promontory Financial Group concludes that significantly more insured mortgages have survived the housing crisis than loans with ""piggyback"" second mortgages, which has been the most prevalent alternative to the use of mortgage insurance for the past decade. The study examined almost 5.7 million mortgages originated between 2003 and 2007. Compared with insured, low downpayment mortgages, loans with piggyback second mortgages were almost 21 percent more likely to go into default.

Tight credit conditions for first-time buyers and a foreclosure pipeline full of homes bought with subprime loans mean that house prices at the low end of the market will continue to fall at a faster rate than prices at the middle and high end, according to Capital Economics. The bulk of these low-end homes consists of distressed properties, which already carry steep discounts as lenders and investors try to capture a piece of the limited demand out there to get these homes off their books and back into the hands of responsible homeowners.

The debate over what constitutes a Qualified Residential Mortgage (QRM) is heating up, with a pivotal argument centered around whether or not the proposed QRM stipulations will actually lower the risk of default. In one corner you have the handful of regulators charged with putting the definition of QRM into the rule book, and in the other corner you have just about everybody else, with consumer advocates joining mortgage bankers in a rare showing, and congressional lawmakers standing firmly alongside them.