Shocking about-face for Feds on mortgage rules

by Adam Smith29 Aug 2013

Regulators have sharply backtracked on requirements for qualified residential mortgages, to the delight of industry lobbies.

New proposals relating to the definition of QRM would scrap earlier proposed requirements for hefty downpayments. Instead, regulators would exempt lenders from risk retention requirements for loans meeting the minimum standard already adopted by the CFPB.

National Association of Realtors president Gary Thomas lauded the move, saying it would help more Americans gain access to housing credit.

"The new standards, which align with those applied to Qualified Mortgages, are stringent enough to protect consumers from unscrupulous lending practices while also creating new opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market.

"Realtors were among the most vocal opponents of the first QRM rule proposed in April 2011 because it would have denied millions of creditworthy Americans access to the lowest cost and safest mortgages. We applaud the regulators for removing the 20 percent downpayment requirement and for adopting reasonable credit and debt-to-income standards," Thomas said.

But a second, alternative proposal put forward by regulators would have an entirely opposite effect, raising the downpayment threshold for risk retention exemption to 30%. Mortgage Bankers Association president David Stevens said the proposal "would severely impair access to credit for all but the most well-heeled borrowers".

Thomas agreed, saying the alternate proposal "dramatically favors the wealthy".

"Research shows that it would take the average American more than 25 years to save enough money to buy a modest home with a 30% downpayment. Realtors will continue to oppose any regulation that requires unreasonably high downpayments from consumers."


  • by Bayview Mortgage Inc | 8/29/2013 9:30:50 AM

    Maybe that is what is needed. if it were to take a borrower 30 years to save the down payment. Maybe they will stay in the home instead of passing them around like yesterdays trash.

  • by Fred Winograd | 8/29/2013 10:08:35 AM

    " And then there was Light."

  • by J Harmon | 8/29/2013 10:25:48 AM

    So much MORE needs to be done to reverse these mortgage changes. Are realtors aware of all the buyers who will blocked out of the market come January? If your buyer has a former BK or FC or Shortsale on their credit or just doesn't have perfect credit but has saved a good amount for a down payment a private investor has always be the way to finance them until they are Fannie/Freddie ready. These were short term private investors and would enable the buyer to purchase the house. However, Private Money Investors will be prohibited to give them a short term mortgage. Balloons are prohibited come January 10, 2014. Private Money Investors are usually just average folks who would rather invest in a mortgage than a CD that pays them nothing every month on their investment. Well these short term investors will be prohibited from making these short term mortgages. So everyone loses. The buyer can't buy, the realtor can't make the sale, mortgage originator can't do the mortgage, the short term investor will lose his ability to earn an income and in the end the FEDS. Why? Because they are limiting the amounts of money people can make. Therefore guess what? The IRS isn't going to be making as much money because people can't earn an income to pay income tax. There are many new rule changes coming to hurt the mortgage industry which in turns hurts NAR and homebuyers. Please see what else can be done to stop these Regulations in January. I am a Realtor and have been a Mortgage Originator for 26 years. I've seen it all and this January will usher in another 2008 and slump in housing. I am really worried about us all. Check out the CFPB website. The new 3% rule will wreak havoc on the housing industry.


Is TILA-RESPA a good or bad thing long term?