QRM is Dead!

OK I don't know what your take or position was on this but I was calling for this to never even implement about 2 months ago. When all the naysayers gave me push back, I was happy to see this hit the wire late on Friday, so I figured I'd share it and toot my horn on the 60 day previous call. I know its still TBD but I think its dead anyway enjoy the read and its good news for the industry...

I had an interesting conversation on Friday with one key industry player in the risk retention debate. Without giving away any hints on his identity, he relayed this scenario, which I paraphrase for you: FDIC chairman Sheila Bair, a big booster of RR, leaves next month and exits the debate permanently. By August or so legislation is introduced that amends the Dodd-Frankbill and gets rid of the whole concept of risk retention, qualified residential mortgage and its cousin qualified mortgage. In other words this colossal industry headache goes away and mortgage bankers are happy and hopefully consumers will be, too. As for the regulators, I'm sure they have plenty of other issues on their plates. From what we are told, of the six agencies involved in the RR/QRM debate, few of them see eye to eye...

As for Bair, the mortgage insurance industry is none too sorry to see her leave. Some MI officials have been griping to me for months that she doesn't seem to recognize (at all) MI coverage. The irony of this whole matter is that the MI industry introduced the concept of a QRM into the risk retention debate. They just assumed that politicians and regulators would recognize MI coverage. But somewhere along the line the MI industry was shown the door. Funny, how those things work in Washington...

What does this all mean?

Looks to me like the ridiculousness of the whole concept of Lender fronted risk retention (QRM) where a lender had to keep 5% of their skin in the game for making a loan to a borrower that didnt have enough down payment (likely 20% but it still was never determined on exactly the parameters) is never going to happen. This is very good for consumers and all the rest of us in the industry. I actually thought there may be a slight chance for it to pass but only under the scenario where the big 4 continued to get exemptions from the same laws everyone else has to play by (the proverbial unfair advantage that seems to be the norm these days).