I read this morning a blog post from a Realtor in Los Angeles, advocating the higher QRM standards that are proposed under the Dodd Frank bill. QRM stands for Qualified Residential Mortgage, and requires lenders to hold back as "Capital", 5% of the loan amount on any loan made with less than 20% down that's not sold to Fannie Mae, Freddie Mac, or other government agencies. Obviously a good post, since 150 people commented, many agreeing with him.
Experts predict that this requirement will increase interest rates on these loans by anywhere from 3/4% to 4%. Is that good for your real estate business?
Since the government plans on dismantling and eliminating Fannie Mae and Freddie Mac, and the complete abscence of any private secondary market, this would eliminate affordable conventional financing with less than 20% down for homes. Is that good for your real estate business?
This 5% requirement would put a huge burden on the streamlined, service oriented small mortgage banker, potentially putting them out of business, leaving customers just the big banks to do mortgage loans, along with their 90 day turn around times. Is that good for your real estate business?
Affordable, low down payment financing virtually created the middle class in America. The crazy underwriting and sub-prime loans of 1998 to 2008 are what created our problems now. NOT low down payment mortgage loans. The Secretary of HUD reported recently that the majority of recent loans are good performers. Most industry insiders report that mortgages made since 2008-2009 have been good performers and profitable business, even those with low down payment. Why? Because they've been well underwritten.
The former Senator Chris Dodd, was in the pocket of Mortgage Criminal Angelo Mozilo of Countrywide as one of his "friends of Angelo". Rep. Barney Frank pushed for easier and easier financing from Fannie Mae and Freddie Mac as evidenced EVERYWHERE......
To protect they're power, they've foisted off on us the Dodd-Frank bill, which has the potential of continuing our poor market for decades through the onerous regulations they've put on everything financial.
I agree with NAR. We need to have more reasonable solutions than the current QRM. If you want your real estate business to be artificially slow for decades, DON'T answer NAR's call to action on this issue. If you want the economy to recover, lead by a good (not hot, not bubblicious) housing market, answer the call to action and comment on QRM, and ask for more reasonable answers.
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