Bottom Line: QRM Bad for Homebuyers

The National Association of REALTORS® (NAR) and its over 40 partners concerned about the proposed qualified residential mortgage regulation formed the Coalition for Sensible Housing Policy and have released a white paper analysis on the impact of the QRM provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act. The coalition has asked for and received an extension of the comment period until August 1, 2011. The REALTOR® Association is working hard to lobby in opposition for the imposition of increased down payment requirements that are part of the QRM rules.

According to NAR, the Proposed QRM Standards include:

  • The proposed QRM rule would require an 80% LTV, which requires a 20% down payment.
  • The proposed rule would also limit the mortgage payment to 28% of gross income and limit all debt to 36%.
  • No credit score requirement is included, but a mortgage loan would qualify as a QRM only if the borrower is not currently 30 or more days past due on any debt obligation.
  • Borrowers could not have been 60 or more days past due on any debt obligation within the preceding 24 months.
  • Borrowers could not have, within the preceding 36 months, been through bankruptcy, been foreclosed on, engaged in a short sale or deed-in-lieu of foreclosure, or been subject to a Federal or State judgment for collection of any unpaid debt.

Enactment of such rules would have dire consequences on behalf of home sales and would stretch out the ladder to achieve homeownership and ultimately lead to higher mortgage rates. In addition, the rule would require that borrowers meet a number of credit requirements.

“Responsible consumers who maintain good credit and seek safe loan products will be forced into more expensive mortgages under the terms of the proposed rule simply because they do not have 10 or 20 percent in downpayment or even more for equity of refinancing. By imposing excessively high down payment standards regulators are denying millions of responsible borrowers access to the lowest rate loans with the safest loan features,” the white paper outlines.

Not only that but the National Association of REALTORS® analysis below shows it would take more than a decade for the median American family to save enough for a  20% down payment on even a modest home.

Chart: Years to save enough money for a down payment plus closing costs

Source: National Association of REALTORS®

So we’ve already got a tight lending environment and now we will tip the scales even further away from potential homebuyers with increased down payment requirements with the QRM proposed rules? Saving for a down payment is major obstacle for most buyers seeking homeownership.

We are working hard to overturn this proposed QRM rule. Be ready if NAR issues further calls to action on this proposal to help communicate our message on this issue.

Learn more about QRM at www.realtor.org/topics/qrm.

One thought on “Bottom Line: QRM Bad for Homebuyers

  1. There will also be a negative impact on the Illinois economy. Based on a study conducted by Height Analytics 47% of 2009 mortgages for home purchases had less than 10% down payment. That is half of transactions gone and the $28,000- generated from each home purchase. This is a loss of over $1.3 Billion to the Illinois economy.

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