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."

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