The Qualified Residential Mortgage Rule (QRM) part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, is finally starting to look like it’ll not just correlate with the Qualified Mortgage Rule (QM) that was put in place in January, but it will not have the 70% loan to value criteria that was originally discussed.
The QRM provides a set of requirements a loan must meet to be considered safe and eligible to be sold to investors as part of a mortgage-backed security without the lender having to retain 5 percent of the loan amount on its books. If the 30% “skin in the game” criteria was left in place, many lenders would have would have stopped making loans higher than 70% LTV, and loans higher than 70% LTV would have been much more costly.
Now that the FDIC has released it’s final version of the regulation, the other 5 regulating agencies governing the QRM will hopefully correlate with this version. The QM is under the jurisdiction of the CFPB, and is not part of the QRM’s group of 6.
The accounting nightmare of splitting a loan, and retaining 5% on the lenders books would have been ominous. That in conjunction with maintaining compliance departments dealing with multiple regulating agencies (some with conflicting criteria), has been making the cost of originating loans too costly for many lenders without deep pockets.
It’s been interesting that the government has been concerned about banks being “to big to fail”, but their actions have made it more difficult for small and medium sized lenders to function… potentially making the big, bigger.
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. At least there is no onerous down payment requirement, as regulators had originally proposed.
If you are in the Los Angeles area, have any questions or real estate sales or financing needs, feel free in contacting me.
Ron Henderson GRI, RECS, CIAS
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – California Association of Mortgage Professionals
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth