QRM: Buyers and Sellers Benefit More by Acting Now Rather than Later
Our best advice to our clients (BOTH Buyers and Sellers) is to act now ahead of the implementation of the Qualified Residential Mortgage rules being issued later this year. Further explanation of these rules follows, but you must be aware of the potential impact this:
Buyers will probably have to pay higher interest rates on mortgages, and sellers likely will have fewer buyers able to purchase their homes at current prices because of the QRM rule.
Several government agencies are reviewing data to determine what will be the minimum down payment required under the new Qualified Residential Mortgage (QRM) guidelines scheduled to be revealed in the next few months. In the original Mortgage Market Note issued by the FHFA, it was suggested that loan-to-value (the percentage of the overall purchase price which was being borrowed) was a major factor in determining if a loan would default:
“For most origination years, requirements for borrower credit score and loan-to-value (LTV) ratio are the factors that most reduce the over-90-day delinquency rate of mortgages acquired by the Enterprises that would have met the proposed QRM standards.”
The note then made the following proposal:
“A qualified residential mortgage must meet a minimum LTV ratio that varies according to the purpose for which the mortgage was originated. For home purchase mortgages, rate and term refinances, and cash-out refinances, the LTV ratios are 80, 75, and 70 percent, respectively.”
Basically, the original note suggested that a 20% down payment should be the new guideline. We realize that there has been much debate on this issue since and that the minimum down payment required under the new QRM guidelines will probably be less than 20%. However, we can’t know for sure.
Bloomberg reported last month:
“The six regulators drafting the separate QRM rule, including the Department of Housing and Urban Development, the Office of the Comptroller of the Currency and the Securities and Exchange Commission, must decide whether to include such a requirement – and whether to make it less than the 20 percent they originally proposed.”
Will it be more difficult to qualify for a mortgage after the new QRM rules are announced? Probably. Will it cost buyers more? Most likely. Will if affect sellers by reducing the number of qualified buyers for their house? Eventually.
As David Stevens, President of the Mortgage Bankers Association said during a speech in Washington on Jan. 16:
“I have consistently warned of the regulatory tidal wave to come and it’s finally upon us. These changes will impact business operations and the future of mortgage access for years to come.”
Call Hill at 301-452-1409 or email Hill at Hill@LNF.com for help to make the best of today’s sales environment.
F. Hill Slowinski, JD, REALTOR® in DC, MD, and VA
W.C. & A.N. Miller Realtors, A Long & Foster Company
Christie’s International Real Estate
4701 Sangamore Road, Bethesda, Maryland 20816
Tel: 301-229-4000 Fax: 301-229-4015
Direct: 301-320-8430 · Cell: 301-452-1409
Email: HSlowinski@LNF.com · Web Site: www.HillSlowinski.com