QRM Qualified Residential - Can You Afford a 20% Down Payment to Buy a Home?

Qualified Residential Mortgage (QRM) and Risk Retention: Background

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act) became law on July 21, 2010. Section 941 of the Dodd-Frank Act requires financial institutions that securitize mortgages loans to retain at least 5 percent of the credit risk.

The Dodd-Frank Act, however, exempts from the risk-retention requirement securities backed exclusively by “qualified residential mortgages,” or QRMs—mortgages with underwriting and product features that historical loan performance data indicate result in a lower risk of default. By exempting QRMs from the risk-retention requirement, the cost of securitizing these mortgages is reduced, thus providing a market incentive for the wide origination of responsible loans.

Highlights of the Proposed QRM Standards

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.

The QRM definition is of extraordinary importance for three reasons:

1. It will determine the types of mortgages that will be generally available for borrowers for the foreseeable future.

2. It will serve as a precursor for what the successor(s) to the current GSEs (Fannie Mae and Freddie Mac) are likely to be allowed to securitize.

3. Finally, the QRM proposal will telegraph the administration’s intentions for FHA. A narrow QRM will require severe tightening of FHA to prevent huge increases in FHA’s already robust market share.

ACTION REQUIRED-CAN YOU AFFORD 20% DOWN PAYMENT ON HOME?

Tell Congress: 20% Down Payments Put the American Dream Out of Reach

Could your afford a 20% down payment? Could you? Can you envision what this will do to the average American being able to own a home if the Qualified Residential Mortgages (QRM) take effect this year?

Neither can we. And neither can many elected officials in Congress who did not intend for these regulatory provisions to be so narrowly defined. We must continue our efforts to explain how detrimental the new QRM rules would be to the ongoing housing and lending crisis in America.

According to NAR Research, 60% of recent home buyers made less than a 20% down payment, and it would take 14 years for a typical person to save up a 20% down payment to buy a median-priced home.

PLEASE CONTACT CONGRESS TODAY and ask them to make it clear to the regulators that this proposed regulation was not their legislative intent and to instead implement a more reasonable Qualified Residential Mortgage (QRM) that will keep credit-worthy buyers in the market and able to acquire a loan.

New Bill Introduced to Improve Short Sale Process

A 45-day Deadline for Lenders to Respond to Short Sale Request

A new bill to improve the process for approving short sales may soon bring relief to distressed home owners who are unable to keep their homes and hope to avoid foreclosure. The bill, introduced in the U.S. House yesterday and strongly supported by the National Association of Realtors®, would impose a deadline of 45 days on lenders to respond to short sale requests...MORE

NAR President Ron Phipps says "ITS ALL ABOUT JOBS!"

In a recent report from the NAR President, Ron Phipps, the Treasury Department later this week will issue recommended changes to the structure of Fannie Mae and Freddie Mac. According to Phipps, this development has been years-long in debate over what the government’s role in housing should be.

FACTS ABOUT HOW THE HOUSING MARKET
AFFECTS US AS A NATION

FACT: Housing for families is a vital part to our nation. It is stated as fact that 500 jobs are added to the economy for every additional 1,000 home sales. This gives the opportunity to offer to our families, neighbors and friends a chance to work in real jobs

FACT: Every home purchase pumps $60,000 into the economy

FACT: 15% of the national gross domestic product is from housing

FACT: Homeowners pay 80 to 90 percent of ALL federal income taxes

Housing is definitely the engine that drives out economy, yet Critics say housing is a drain on federal resources. Eight of the last ten recessions have ended as a result of robust housing markets. The other two ended as a result of war spending. The choice is easy. America needs a healthy housing market to thrive.

According to Pippin, “NAR will be reaching out to Congress and the White House to emphasize the clear connection between housing, jobs and the economy. Rather than limit support for housing, and the availability of credit, NAR is calling on Congress and the White House to advance policies that will move the housing market back to a healthy 5.5 million sales, where it SHOULD be”.

Here is what NAR will address to Congress:

We will be asking lawmakers to:

• Preserve the mortgage interest deduction at current levels.

• Move the credit pendulum to equilibrium, defined by a median credit score of 720.

• Maintain government backing in the mortgage market as part of GSE Reform.

Pippin states that the these three steps would help bring the housing market back to a normal level, possibly generating an additional 1 million home sales and 500,000 jobs.

Here is hoping that Congress will listen to the voice for real estate and that the White House gets the message: REAL ESTATE IS ALL ABOUT JOBS.

From Nar REPORT: February 9, 2011 by NAR -Ron Phipps