New Qualified Residential Mortgage Standards

September 6, 2013

Federal regulators recently dropped a proposal that would have encouraged mortgage lenders to require a 20 percent down payment from home buyers.

This was a significant decision for the real estate market, as it would have made it more difficult for first-time home buyers and those without a lot of savings to get a mortgage. On the other hand, it would have also helped provide a more stable framework for preventing foreclosures, but based on our Maui real estate market and economy, those issues are on a steep decline anyhow.

Regulators instead issued a revised risk-retention proposal for lenders who securitize mortgages, minus the 20 percent down payment. Banking groups were happy with the revisions, as were affordable housing advocates. One of the provisions calls for lenders to keep a 5 percent stake in the credit risk for certain securitized loans if they don’t meet “qualified residential mortgage” (QRM) standards. The idea is to make sure there are consequences for the lenders if they approve mortgages to those who may not be able to keep up with payments.

Another QRM feature is the requirement of a borrower’s total debt-to-income ratio that would be capped at 43 percent. Also, loan terms would not be allowed to exceed 30 years.

At this point, regulators are searching for a balance between preventing foreclosures and making sure guidelines aren’t so strict as to keep a lot of creditworthy borrowers  from getting their mortgages. Hopefully they will find terms that are acceptable and positive for everyone involved in the process.

We hope you’ve found this update informative! If you need any assistance with your Maui real estate search, you’ll find our contact information at the bottom of the page. We would love to help! Mahalo! – By Mark Harbison


You may also like…