Impact of the QM Rule

The qualified mortgage (QM) rule was implemented in January of 2014. It is the first of two rules that came from the Dodd–Frank Wall Street Reform and Consumer Protection Act that will impact the housing market. This law is intended to protect consumers by strengthening underwriting standards, but some have argued that the rules will raise costs and reduce access for consumers. To gain insight on the impact of the new law, NAR Research surveyed a sample of lenders with questions about the impact of the lending on their business and how the rule could in turn impact consumers.

Here are some highlights from the survey:

When asked about the extent of the QM rule’s impact, 55 percent of survey respondents indicated that the QM rule would affect 2.6 to 20 percent of their originations.

The 3 percent cap on points and fees was the feature of the new rule that most concerned respondents as 60 percent indicated that they were “very concerned”.

A strong majority of respondents indicated that they would defer to investors preferences on how to treat non-QM loans, but 45 percent indicated that they would not originate non-QM mortgages.

Relative to 2013, respondents indicated a high reluctance to originate mortgages with non-QM features and their aversion toward originating non-QM loans increased as credit scores declined. They also indicated an elevated reticence to originate mortgages that fit into the rebuttable presumption definition of the QM rule and even some hesitance to originate safe harbor QM mortgages.

In response to the new rule, the vast majority of respondents plan to increase staff and expenditures on compliance software. In addition, 11 percent will shutter affiliated title insurance or other companies.

What does this change mean for REALTORS and consumers? Consumers should expect to have to document their income, employment and resources. NAR says that if your client has a high debt-to-income ratio, the FHA as well as Fannie Mae and Freddie Mac will be more lenient than private financers. However, if your client falls under one of the other aspects of the non-QM space or even the rebuttable presumption portion of the QM space (e.g. high fees, subprime, interest only, etc.) your client might require help finding a specialty lender. Consider finding a few lenders who specialize in financing these special cases at affordable rates so that you can meet your client’s needs if the time comes.

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