QM rules reduce credit availability, bankers say

by Francis Monfort22 May 2018

A majority of bankers think mortgage regulation has had a negative impact on business production and consumer credit availability, according to results of the American Bankers Association’s (ABA) annual Real Estate Lending Survey.

The survey revealed that almost three in four bankers think that Qualified Mortgage (QM) rules, which impose stringent rules that exceed “ability to repay” standards for borrowers, have reduced credit availability. Additionally, it found that more than 28% of banks are restricting lending to QM segments only. More than half of them (52%) make non-QM loans only to target markets or with other restrictions, even though the loans meet ability-to-repay regulations.

QM loans accounted for 90% of the mortgage loans a typical bank made in 2017, according to the survey. ABA said the finding signals the continually limited extension of non-qualified mortgages. The average percentage of non-QM loans fell to 10% in 2017 from 16% in 2013.

“The survey shows how the current rules are making it difficult for banks to fully serve their communities,” said Robert Davis, ABA executive vice president in charge of mortgage markets. “The good news is Congress is currently considering legislative changes that would allow a greater portion of creditworthy borrowers access to mortgages.”

The bankers surveyed cited higher debt-to-income levels as well as less complete documentation as the most common factors why some loans fall short of QM standards. Despite the challenges, ABA said banks have seen a positive trend in loan production.

“In the face of those regulatory barriers, single-family mortgage loans for first-time homebuyers still accounted for a record 17% of all loans in our survey,” Davis said. “That shows how banks are trying to help all creditworthy borrowers share in the American dream.”

The survey, which includes data from 161 banks, had commercial banks (65%) and savings institutions (35%) as respondents. About 73% of the participating institutions had assets of less than $1 billion.


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