Changes to QRM Proposal a Victory for Consumers and Industry
The Qualified Residential Mortgage (QRM) rule will create additional underwriting standards—most notably a downpayment requirement—in order to avoid risk-retention requirements for mortgage securitizations. In a letter to six regulators, ALTA joined members of the Coalition for Sensible Housing Policy urging for a broad definition of the QRM and to keep it consistent with the Qualified Mortgage (QM) mortgage rule, was was develoed by the Consumer Financial Protection Bureau and goes into effect in January.
ALTA urges regulators to oppose a stringent 20 percent down payment requirement, saying this would limit the ability of lower-income households and first-time buyers to enter the market.
In a victory for the industry, the FDIC along with five other agencies on August 28 re-proposed the QRM rule and now aligns better with the QM Rule, which puts limits on debt-to-income ratios, prohibits low- and no-documentation lending, negative amoritizations, balloons and interest-only loans. CoreLogic had predicted the QM rule coupled with the QRM rule with a 10 percent downpayment requirement would result in only 25 percent of purchase originations meeting eligibility requirements.
ALTA was pleased to learn that regulators listened to industry and consumer coalitions to modify the QRM rule and eliminate the proposed 20-percent down payment requirement. Understanding that sensible credit standards can exist without a significant down payment requirement will help ensure the possibility of homeownership for credit-worthy borrowers for generations in this country.
As the independent third party at the real estate closing table, we understand the importance of having access to safe and affordable loans. For more than a century, title insurance has provided this backstop, helping ensure residential mortgages are of very high credit quality while reducing risk for all parties involved in real estate transactions.
ALTA will continue to promote a commonsense underwriting requirement to the QRM rule, which, through a title search backed by a title insurance policy, is as an essential aspect of safe and secure mortgage lending that ultimately allows lenders to lend, spurs investors to invest and leads to consumers getting the keys to their home.