Monday, October 28, 2013

New Mortgage Rules

A recent article release from Florida Realtors discusses whether the new mortgage rules are a positive change.  To read the article, click here, or read below.

 A coalition of 51 consumer organizations, civil rights groups, housing organizations, lenders, real estate professionals and insurers – a group that includes the National Association of Realtors® (NAR) – issued a white paper supporting the latest version of Qualified Residential Mortgage (QRM) rules currently in comment period.

Following the mortgage meltdown, lawmakers and federal agencies looked for a way to make sure toxic loans no longer harmed the market. To do that, they focused one eye on the qualifications a potential homebuyer must have to get approved for a mortgage. At first, some of the proposals caused concern among Realtor groups who feared a second real estate meltdown if buyers had to follow strict new rules, such as a minimum 30 percent down payment.

However, a white paper issued by the Coalition for Sensible Housing Policy finds that the current proposed mortgage rules generally find a fair balance between protecting the U.S. economy without making homeownership unavailable to many Americans – it “effectively limits the risk of default without excluding large members of creditworthy borrowers.”

The Coalition will submit the white paper to regulators during the rule’s public comment period that ends Oct. 30.

Analysis by The Urban Institute, which looked at current loans and how they would have fared under the QM proposed rules, found that the proposed QRM would reduce the risk of default and delinquency by more than half:

• Loans purchased by Freddie Mac and Fannie Mae that met the re-proposed QRM standard had default rates of 4.1 percent compared to 8.7 percent for mortgages that did not qualify for QM status.

• The delinquency rate for mortgages in private label securities that did not meet the re-proposed QRM standard was 30.6 percent. The delinquency rate for purchase and refinance loans that met the new QRM proposal was nearly two thirds lower at 12.6 percent.

“In synchronizing the definition of QRM with QM, the revised rule will encourage safe and financially prudent mortgage lending, while also creating more opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market,” the paper concluded. “Most importantly, it will help ensure creditworthy homebuyers have access to safe mortgage financing with lower risk of default.”

The white paper can be found online.
To read more about the Coalition for Sensible Housing Policy and its member groups, visit their website.