www.lasvegasmtg.com Report: The New Standard for Mortgages QRM Part 2
By John Le Francois
Last week I wrote an article regarding the new proposal for QRM "The Qualified Residential Mortgage" proposal that is supposed to eliminate the risks of Toxic Mortgages held by banks by setting standards on what constitutes a risk free Mortgage. To read the previous article click here.
Last week testimony at House Capital Markets Sub Committee that the proposed QRM guidelines are so restricitve that the unintentional result would be to put millions of qualified homeowners out of the housing markets and it would stall any hopes of stabilizing the housing recovery.
Industry leaders from the National Association of Realtors, Mortgage Bankers, Consumer Advocacy Groups, Mortgage Insurance Companies, Center for Responsible Lending, and the Congressionall Black Caucus Group were outspoken in their opposition to the proposed changes.
If the proposed changes were to take effect it is estimated that millions of homeowners would have to wait 15 years to save up the required 20% down payment on a medium priced home. The new rules for refinancing would eliminate 25 million people from refinancing their loans.
CoreLogic testified that data analysis from 2002 to 2008 of loans that defaulted would marginally changed the default rate by raising the down payment requirements in 5% increments. The increase in down payment only decreased the potential for default by .2% to .3%, but would eliminate 7% to 15% of borrowers eligible for a home loan.
It is ironic that the very Dodd-Frank risk retention proposal was set out to protect the tax payer from bailing out the banks from selling Sub Prime Loans is now allowing the Banks to set the standard for the Qualified Residential Mortgage. Once again Congress has seen fit to allow the FOX to guard the Hen House.
If you are not fortunate enough to have 20% down and you still want to buy a home then the banks are very happy to sell you a Sub Prime Loan Product with a higher interest rate. It is estimated that the Sub Prime loan interest rate would be .75% to 3% higher then the QRM rate.
Rep. Jeb Hensarling, R-Texas, said of the testimony, "Any time you get the mortgage bankers, the mortgage insurers, the Center for Responsible Lending and Congressional Black Caucus to agree on something, maybe this committee should pay a little bit of attention."
Lets hope the House Sub Committe Members will listen!