The FDIC was the first of six regulators to finalize the QRM (Qualified Residential Mortgage) Rule. The QRM rule provides a set of requirements a loan must meet to be considered a safe loan and eligible to be sold to investors as part of a mortgage-backed security without the lender having to retain five percent of the loan amount on its books. Because the QRM loan comes without the risk-retention requirement, lenders should be able to make more loans and also make them more cheaply, because they don’t have to pass along that risk-retention cost to borrowers.
NAR has been vocal for several years that the QRM rule should be broad rather than prescriptive and that it should match up with the qualified mortgage (QM) rule, which took effect at the beginning of this year, and the QRM rule does in fact do that. The QM rule provides ability-to-repay standards for safe and affordable loans, whether or not they’re securitized for sale to investors. Under the QRM rule, as under the QM rule, loans are generally considered qualified if the borrower’s debt-to-income ratio is 43 percent, among other things. There is no onerous down payment requirement, which regulators had talked about including and which NAR and coalition partners strongly opposed.
The rule takes effect in 12 months. That will give lenders time to align their internal processing systems with the requirements. Since lenders have already been aligning their systems to the QM rule, the process can be expected to go smoothly. For lenders, having the two rules in alignment provides clarity that they’ve long been asking for. One result of this new clarity could be a widening and deepening of loan availability, which has been one of the main stumbling blocks to increased home sales.