Conventional Financing Threatened By Big Bank
Q R M Qualified Residential Mortgage .This proposal states that lenders need to keep some skin in the transaction. That is the purpose behind the bill's "qualified residential mortgage" rule. It says that lenders have to hold five percent of the risk for two years. It is hoped that they would then respond by not making unsustainable loans. This means that on a $200,000 mortgage, the bank would be required to keep $10,000.00 in a reserve account just in case the loan faults. Besides that, the purchaser will have to come up with a $60,000 down payment. The loudest conversation about this bill is that it will trickle down and cost the consumer more money to obtain conventional financing.
The challenge is that one big bank, Wells Fargo, may succeed in seeing to it that the definition of a risky loan is so expansive that only a few banks will be able to remain competitive with a conventional loan. Wells Fargo wants the qualified residential mortgage to exempt loans where borrowers have put down at least thirty percent. That is a very high bar to achieve.
Wells Fargo is trying to create a market advantage out of this new rule.
The Mortgage Bankers Association is siding with borrowers and small banks, both of whom will be hurt by the new requirements.
This will push more loans onto FHA.
Home prices will fall when fewer borrowers are able to qualify for Conventional Financing.
Wells Fargo's gain will be new pain for Realtors and private mortgage insurance companies.
It really isn't fair to blame "government regulations" for a rule that is being lobbied for by a private bank. This is the power that Wells Fargo has acquired in the Mortgage Industry. They will do whatever it takes to have an advantage in their markets. Even if it means to destroy, and eliminate the very clients that have given them life.