Don't punish today's qualified buyers with QRM burden!

By
Real Estate Broker/Owner with Riverbend Realty, Cape Girardeau, MO 2004008944

I am a REALTOR®, working mostly with foreclosure properties. I am on the front lines of both selling and listing affordable homes. Home Sweet HomeWhile there have certainly been mortgage issues in the past, I know that today's homebuyer with 5 to 10% down is a better risk than the foreclosed homeowners I meet when I am trying to get them to vacate foreclosed properties. Comparing that buyer with today's more-qualified buyer is not an accurate predictor of future foreclosure rates. Most of those people met virtually NO requirements when they purchased those homes with 100% or even 105% loans. 

Forcing all buyers to have 20% down will keep many typical first-time owners out of the market, but it will also KEEP the current glut of foreclosed properties vacant and ON the market. Neither of those things will help housing recover. From a social standpoint, there is also a vast transfer of future wealth happening right now as investors out-buy owner occupants. That, also, is a financial and social mistake.

The proposed QRM rule (Qualified Residential Mortgage) includes provisions that would require 20% down payments on new loans, higher ratios for refinancing, consistent debt-to-income ratios, and a requirement to verify borrowers incomes. Obviously, borrower incomes should always be verified; and maybe the DTI ratio needs to be reevaluated. Current and future buyers are being blamed for an economic tragedy that they did not create or in which they are not even participants.

I would be completely OK with applying all of the new QRM standards, however, to home equity lines of credit. That would protect the market and the borrower. Equity credit should be extremely hard to get. It is the most destructive type of credit, right up there with 110% LTV because it almost always creates upside-down owners. Put a stop to that and you will lower foreclosure rates significantly. BUT don't punish people simply trying to buy a home.

Posted by

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If you are looking for a foreclosure in Cape Girardeau, Perry, N. Scott, or Bollinger counties, I am the region's most experienced REO agent. As the area's ONLY Fannie Mae direct listing agent, I list more foreclosure properties than any other agent in this MLS. I am among the few local agents approved to both list and sell HUD properties. Give me a call if you are looking for help with the purchase of a foreclosure property.

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http://www.homepath.com/  for Fannie Mae properties

http://www.homesteps.com/  for Freddie Mac properties

http://www.hudhomestore.com/ for HUD properties (foreclosures that were FHA financed)

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Comments (9)

Suzanne McLaughlin
Sabinske & Associates, Inc. (Albertville, St. Michael) - Saint Michael, MN
Sabinske & Associates, Realtor

Liz - what a great post.  I suggested this one because I truly believed that you wrote this from the heart and with so many of us REO and short sale agents in mind. 

May 20, 2011 03:26 PM
Linda Flack
Realty Executives in The Villages - The Villages, FL
The Villages is where you retire with attitude

I understand the idea of 20% down. I agree the first time buyers still need a break. Keeping a handle on fraud and misuse of power are required to keep us from another debacle. Greed and fraud perpectuated by lending institutions with the rules of lending thrown out the window put us in this depression. Control the bad lending practices and fraud and you can lend to 1st time buyers with only 5% money.

May 20, 2011 03:27 PM
Stanley Stepak
Howard Hanna - Avon Lake, OH - Avon Lake, OH
Realtor - Avon Lake, Avon, Bay Village, Westlake,

This whole things has been driving me crazy.  the impact on the market this will have is enormous

May 20, 2011 03:31 PM
Tni LeBlanc, Realtor®, J.D.
Mint Properties, Lic. #01871795 - Santa Maria, CA
Tenacious Tni (805) 878-9879

I just feel like it is enough already.  The housing market has taken enough licks.  I feel like this is just kicking it when it's down.  As a self employed borrower I wonder what it will take for me to ever get a mortgage again.

May 20, 2011 04:52 PM
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Suzanne~ I did write it from the heart. I truly believe that most loans that are being made now with 5% to 10% down are good loans. Thank you for the SUGGEST~

May 20, 2011 06:02 PM
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Linda~ I completely agree with you! The wrong people are being blamed for the crisis, and the wrong people are being watched.

May 21, 2011 06:36 AM
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Tni~ Yes, we need to be responsible in how we react to the messes of the past. Doing SOMETHING is only good if it is the correct SOMETHING.

May 21, 2011 06:37 AM
Liz Lockhart
Riverbend Realty, Cape Girardeau, MO - Cape Girardeau, MO
GRI, Cape Girardeau Real Estate

Stan~ The immediate reaction seems to be a "let's just go back to the way it was in the good ole days." There was a brief time between "the good ole days" and the craziness of 100% and lier loans when the lending standards brought responsible buyers to the table. The advent of stupid lending, though, undercut those buyers and devalued their homes.

May 21, 2011 06:42 AM
C. Lloyd McKenzie
Living Albuquerque - Albuquerque, NM
Living Albuquerque

I think that there is a concerted effort to push this industry further into the dirt. The lawmakers are themselves compromized it seems. 

May 25, 2011 02:17 PM