What is a Qualified Mortgage & why should you care what will be done?

What is a Qualified Mortgage and Why should you care what will be done with it?

The purpose of a Qualified Mortgage was to reduce the risk of a future housing market crash. This was to be accomplished by having standardization in the lender’s qualification of potential home buyers.  This was to tighten the reins on lenders and insure that there would be good loan qualification standards. This was going to be done by larger down payments and other standards to ensure a higher probability that the mortgages will not default

The goal is altruistically very good: to prevent another housing market crash similar to what happened in 2008. The legislators proposed that lenders take on 5 per cent of the risk of mortgage defaults. The objective was for lenders to have “skin in the game”. In other words legislators wanted lenders to have a financial stake in the game.

The Federal Deposit Insurance Corporation (FDIC) wanted buyers to have a 20 per cent down payment of the home sales price. On the surface this sounds like a brilliant idea. After all that is how my father bought his house in 1973. The purchase price he paid was $41,500.00 and his income was $38,000.00.

Today the median purchase price in my market place is around $650,000.00 and the average income is around $65,000.00.

My father needed around $9000.00 to buy a home. The average buyer now needs to have around $135,000.00 to buy the home.

Let’s be realistic how many of you have over a $100,000 in your savings account? I am all for responsible ownership, but basically this would eliminate middle to lower middle class home ownership in my market.

 

So what is your thought on this subject? Do you realize what effect this will have on our fragile economy? I would love to hear what you think? Also what solution you could offer to meet the Objective what legislators had in mind?

 

If you are a consumer who is considering buying or selling a home, investment real estate, vacation homes, or beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Culver City, Marina Del Rey, Venice or Malibu. Feel Free to give me a call at 310.486.1002or email me at homes@endrebarath.comor visit one of my websites at http://www.endrebarath.com Your Pet Friendly Realtor. I contribute a portion of my commission to Local Animal Rescue Organizations.