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QRM Rule Published in Federal Register (April 29, 2011)
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On April 29, 2011, six federal regulators (the Fed, OCC, FDIC, SEC, HUD, and FHFA) jointly published the proposed Qualified Residential Mortgage (QRM) rule in the federal register. The proposed rule implements a provision of the Dodd-Frank Act that requires lenders that securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a QRM or is otherwise exempt (for example, FHA mortgages are also exempt). Comments on the proposed rule are due by June 10, 2011. The proposed rule narrowly defines a QRM, including a 20% downpayment, low debt-to-income ratios, and other strict credit criteria. NAR has already raised concerns about the impact these standards will have on the pricing, terms, and availability of non-QRM loans to otherwise creditworthy borrowers, including low and moderate income borrowers who maintain good credit and seek safe loan products to qualify for affordable mortgages. NAR will submit written comments by the deadline.
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Call for Action: Tell Congress to Oppose Down Payment Hike>
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act . Since the beginning of the 111th Congress in early 2009, NAR has been working closely with the Members and staffs of the House Financial Services Committee and the Senate Banking Committee to ensure that Wall Street Reform legislation did not adversely affect REALTORS®.
On May 7, 2009, the House of Representatives passed the Mortgage Reform and Anti-Predatory Lending Act of 2009 by a vote of 300 – 114. NAR supported this bill because it acts to protect both the consumer and the housing sector. NAR secured a significant victory by “carving out” real estate brokerage and management activity from the bill’s broad definition of “mortgage originator” which, unchecked, could have encompassed significant portions of our member’s daily customer service activities.
REALTORS® Have a Strong Stake in Preventing
Abusive Lending
Abusive and predatory lending practices are a serious problem for our nation's communities. Because of abuses in the subprime market, families are losing their homes and savings, foreclosure rates are higher, and some neighborhoods face increased vacancy rates. Empty neighborhoods, or those where the majority of houses are for sale, can be perceived as blighted. This leads to declining prices and inevitably devastates the strength and stability of those communities and the families who live there.
How Did This Happen?
During the real estate boom, many lenders originated risky mortgages with floating interest rates and weak underwriting standards. While some in the media may have over-dramatized the situation, a number of subprime lenders that made problematic loans have gone out of business, and the delinquency rate for subprime loans at the end of 2006 was more than 13 percent--4.5 percent are in foreclosure.
Subprime Lending Does Have a Legitimate Role
for Many Borrowers
While abusive lending does occur primarily in subprime markets, not all subprime loans are abusive or problematic. In fact, responsible subprime lenders have played an important role in helping millions of consumers achieve homeownership. NAR supports federal legislation and regulation that prevents predatory lending while maintaining a role for responsible subprime lending.
Education is Key
REALTORS® believe that financial education is an important defense against abusive lending practices. NAR and its partners have issued a consumer education brochure. It emphasizes the importance of understanding the different types of available mortgages, explain how to avoid the pitfalls and entrapments of predatory loans, and suggest what homeowners should do if they are concerned about their mortgage or foreclosure.
Consumers who need immediate advice should call 888/995-HOPE, or visit www.995hope.org.
The Federal Reserve Education website provides extensive foreclosure resources and information for consumers. |
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