The Nine Most Dangerous Words...

I believe it was Reagan that said the 9 most dangerous words in the English language are “I’m from the Government and I’m here to help”. Well, they’re at it again. Earlier this month there was an increase to FHA mortgage insurance premiums. Then followed by the new Fed laws on bank compensation which had the very foreseeable effect of higher interest rates. Now…QRM, or Qualified Residential Mortgage.

For those of you unaware of what QRM is, the proposed rule would require that the lender hold a percentage stake in any loan that is not considered a QRM. To be a QRM loan you are required to have a 20% down payment, a lower debt ratio than current guidelines, and tighter restrictions on past credit history.

Increasing lender risk will discourage lending(again), make it harder to qualify(again), likely result in increased interest rates(again), and most experts believe the biggest impact will be felt by low to moderate income borrowers which seem to be who most of this legislation is aimed at protecting(once again…again). Thank youFrank-Dodd Act, it keeps getting better all the time.

Look, the sky isn’t falling and I don’t mean to take the turn to Negative Town. This only effects certain loans, FHA is exempt. FHA has seen its market share decrease significantly since 2009, this should bring it up. But I don’t think increasing market share because you’ve eliminated other options is a healthy way to go about it.

Home prices are the most affordable they have been in 40 years and folks still aren’t buying. One of the biggest reasons is because they can’t. Making it harder to qualify or restricting the availability of home loans isn’t going to help the problem. NAR has already come out against this and raised their own concerns. I can only assume, although amazingly I haven’t heard much, that lenders will be fighting this as well.

If you have questions or concerns about how this new legislation could affect your ability to buy or refinance a home in the near future, call me today. I will be happy to discuss your options with you further.

Now I will step off my soap box and wish everyone a great day!