QM problems already starting, claims mortgage pro

by Ryan Smith08 Jan 2014
The Consumer Financial Protection Bureau’s new mortgage rules don’t take effect until the end of the week, but they’re already causing trouble, one mortgage industry head.

The CFPB on Monday released a “fact vs. fiction” guide regarding the new Qualified Mortgage rules. While the guide assured borrowers that the rules won’t hamper access to mortgages, National Association of Independent Housing Professionals President Marc Savitt has his doubts.

“All I can say is that we’re already starting to see some of the problems that will be arising, even though (QM) doesn’t go into effect until Friday,” he said Tuesday.

Savitt, a West Virginia mortgage broker, had particular scorn for the QM rule’s recommended debt-to-income ratio of 43%. Although in theory a loan can still meet QM standards with a DTI over 43%, in practice that can be difficult.

“The 43% maximum debt ratio is not a one size fits all,” Savitt said. “I had a case sent to me yesterday where the borrower had a 732 credit score. The borrower was putting down $79,000, which left a $50,000 loan. The borrower has been on her job for 20 years. Pretty good, right? The debt ratio was 47%. The loan was turned down by Fannie Mae as being too risky.

“The decision on this loan lacks common sense,” Savitt said. “We’re going to see more and more of this. It doesn’t mean borrowers can’t get a loan, but they’ll have to go into a non-QM loan, which will cost the borrower more money.”

Savitt doubted the QM rule in its present form would be workable in the long term.

“The way the CFPB perceives this rule to be is quite different from the way a lot of lenders perceive it,” he said. “…I think the CFPB in very short order will have to revisit these rules and make some changes to protect the consumer.”
 

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