Posted tagged ‘QRM’

OCC Says Multi-Dimensional Risk Management Imperative for Industry

September 14, 2013

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In this article, written by Krista Franks Brock, points out the need for a diligent effort to regulate the mortgage industry both from within and without. This is the only way to ensure that the mortgage business doesn’t fall back into the old practices that caused widespread mayhem in the past. Please read the article below and let me know what you think.

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Speaking at an industry conference in Phoenix, Arizona, Wednesday, Darrin Benhart, deputy comptroller for credit and market risk with the Office of the Comptroller of the Currency (OCC), said the changing regulatory environment requires mortgage lenders to consider a number of potential risks on different fronts.

“As you well know, the list of mortgage-related reforms is extensive,” Benhart said, naming the qualified mortgage (QM) and qualified residential mortgage (QRM) among them. “These reforms mean you will need an even greater emphasis on risk management techniques that not only look at credit risk but also encompass operational and compliance risk,” he said.

While in the past, various aspects of risk were often considered and managed individually, Benhart says going forward, it is important for all risks to be monitored in a holistic manner.

“Risk management groups today need to be multi-dimensional, and banks need a culture that promotes risk identification across business lines,” he said.

Benhart says home equity lines of credit (HELOCs) and collateral valuations are two key areas his office will be watching in the coming year.

To see the complete article – please use the link below.

Risk Management Imperative for Industry

Analysts Weigh in on Potential Impact of Proposed QRM Rule

September 3, 2013

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Whatever the rules are that are adopted it will probably cost the home buyer more money to close.  Please read the article below and let me know what you think.

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Following the release of the revised Qualified Residential Mortgage (QRM) rule from six federal agencies, several analysts offered insight into how the revisions might benefit or impede progress in the mortgage market.

In the new proposal, the push for a 20 percent down payment in 2011 would be replaced with a no down payment requirement, which would bring QRM more in line with the Qualified Mortgage (QM) rule the Consumer Financial Protection Bureau (CFPB) released in January.

Another important revision that aligns with the CFPB’s QM definition is the 43 percent debt-to-income ratio requirement for borrowers rather than the original 36 percent limit.

Fitch Ratings stated it believes syncing QRM and QM proposals will make the transition to the new rules easier for originators and lead to reduced costs.

“Most of the existing prime jumbo originators have been implementing technology and internal methodologies to meet the requirements of QM. However, the uncertainty over QRM had posed some logistical challenges,” Fitch said.

According to the rating agency, adopting a QRM standard that mirrors the QM definition would also trigger more activity for the jumbo origination and securitization market.

To see the complete article – please use the link below.

Impact of Proposed QRM Rule

Agencies Propose Revised QRM Rule

August 30, 2013

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Even the SEC commissioners are split over this revision being a good idea. Please read the article below and let me know what you think.

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UPDATED to include dissenting comments from SEC commissioners Daniel Gallagher and Michael Piwowar.

Six federal agencies have issued a notice revising their proposed qualified residential mortgage (QRM) rule that would require lenders to retain risk when selling mortgage-backed securities (MBS).

The FDIC, HUD, Federal Housing Finance Agency (FHFA), Office of the Comptroller of the Currency, Federal Reserve, and Securities and Exchange Commission (SEC) jointly released on Wednesday their proposed revision, which was created in consideration of the industry’s response to the original proposal issued in 2011.

That proposal required lenders to keep a stake in the loans they sold in which borrowers were spending more than 36 percent of their income on payments and in loans with down payments of less than 20 percent. At the time, critics argued it would create an even more restrictive lending environment.

Under the new proposal, the 36 percent income threshold has been raised to 43 percent, relaxing the exemption standards somewhat. The revised rule also eliminates the down payment requirement, opening up lending for low-income borrowers.

The agencies also made adjustments to bring the QRM proposal more in line with the “qualified mortgage” (QM) rule handed down by the Consumer Financial Protection Bureau (CFPB) earlier in the year. The alignment opens up the scope of QRM eligibility, which was originally “limited to closed-end, first-lien mortgages used to purchase or refinance a one-to-four family property, at least one unit of which is the principal dwelling of the borrower.”

“[T]he agencies seek to ensure that relevant definitions in the proposed rule and in the CFPB’s rules on and related to QM are harmonized to reduce compliance burden and complexity, and the potential for conflicting definitions and interpretations where the proposed rule and the QM standard intersect,” the 500-page document reads.

To see the complete article – please use the link below.

Revised QRM Rule

Experts See Risk of a Housing Bubble Resulting from Fed Policies

May 8, 2013

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I don’t think that if a “Bubble” did occur it would amount to anything big. Instead of a burst bubble I think it would be like a slight hiccup. Please read the article below and let me know what you think.

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A majority of real estate experts responding to a recent Zillow survey expressed some concern that the Federal Reserve’s current policies could lead to another housing bubble.

Only 4 percent of respondents are not at all worried about a bubble resulting from the Fed’s monetary policy that is keeping mortgage rates down. However, 48 percent see the Fed’s policies as “a little risky,” and the remaining 48 percent categorized the risk as “moderate to high risk.”

“How the Federal Reserve handles the eventual winding down of its policy of quantitative easing will be critical in determining if the current period of rapid appreciation is a benign bounce off the bottom or a more dangerous bubble being re-inflated,” said Stan Humphries, chief economist at Zillow.

The more than 100 survey respondents expect home prices to continue their upward trajectory this year and over the next few years. However, the general consensus is that price increases will slow after the next year or so.

Experts expect prices to end this year 5.4 percent higher than their level at the start of the year. After ending 2012 at $156,800, the median price would end this year at $165,280, according to this forecast.

From 2015 through 2017, experts suggest a more modest rise per year of 3.5 to 3.7 percent.

A cumulative rise of 22.3 percent is forecasted through 2017, according to Zillow’s survey.

The accelerated appreciation over the next year is “consistent with a market struggling to satisfy strong demand from buyers attracted by rock-bottom interest rates and improving economic conditions,” Humphries said.

To read the complete article please use the link below.

Risk of a Housing Bubble

CoreLogic: QM, QRM Rules Remove 60% of Loans and 90% of the Risk

February 14, 2013

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About 60 percent of loans written today would not be acceptable under the finalized rules for a qualified mortgage (QM) and the anticipated rules for a qualified residential mortgage (QRM), according to new researchfrom CoreLogic.

CoreLogic analyzed 2.2 million loans written in 2010 to determine what percentage of them meets QM and QRMguidelines. The firm chose 2010 because underwriting trends during that year are quite similar to today’s.

QM rules would eliminate about 48 percent of today’s mortgage originations, and when the QRM (with a 10 percent down payment requirement) is added to the equation, about 60 percent of today’s loans would be eliminated.

The effects will be somewhat larger on the purchase origination market compared to the total market because of the anticipated QRM down payment requirement, which would eliminate about 27 percent of purchase originations compared to 13 percent of total originations.

“The combined impact of QM and QRM is that only 25 percent of purchase originations would meet the eligibility requirements of the QM rule’s safe harbor,” according to CoreLogic.

While the impacts will be vast, CoreLogic points out the immediate impacts of the QM and QRM rules will be minimal because for the next seven years, loans that meet the underwriting requirements of the GSEs and the Federal Housing Administration (FHA) are exempt from the new guidelines.

“The irony of the exemption is that it reinforces the role that the GSEs play in the market, making it harder to enact GSE reform,” CoreLogic stated in its report.

Currently, about 90 percent of newly originated loans are backed by the GSEs and/or FHA, so the market will be able to continue in its current path for the next several years

To read the complete article please use the link below.

Remove 60% of Loans and 90% of the Risk

Capital Economics Says QM Rules Won’t Hinder Recovery

January 17, 2013

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The long-awaited definition of the Consumer Financial Protection Bureau’s (CFPB) ability to repay rule and qualified mortgage standards have been unveiled, andCapital Economics says the new rules “will not hamper the housing recovery.”

Previously, some concern circulated the industry that the qualified mortgage rule would be too limiting, possibly shutting reasonably safe borrowers out of the market and stalling a market recovery.

However, Capital Economics says “the qualified mortgage guidelines don’t look overly onerous.”

Furthermore, the analytics firm suggests, “it’s worthwhile asking whether these new rules are excessively permissive.”

The CFPB’s ability to repay rule requires lenders to verify borrowers meet certain minimum requirements, taking into account credit history, total debt, employment status, income, and assets.

However, the rule does not set specific underwriting rules or impose precise loan-to-value or loan-to-income ratios.

One way of meeting the ability to repay rule—writing a qualified mortgage—does, however, require a debt-to-income limit. The rule requires borrowers to have debt payments of no more than 43 percent of their gross income.

A second way to meet the ability to repay rule is to follow the underwriting guidelines of Fannie Mae and Freddie Mac.

However, this rule “doesn’t sit comfortably with the widespread conviction among policymakers that Fannie Mae and Freddie Mac’s role in the housing market needs to be reduced or even eliminated completely,” according to Capital Economics. Some fear this rule could create more dependence on the GSEs.

Loans that will not qualify as qualified mortgages include negative amortization, interest only, balloon loans, no-doc loans, and loans exceeding 30 years. These loans can still qualify for the ability to repay rule.

However, Capital Economics finds it “unlikely” lenders will write these types of loans much in the near future.

To read the complete article please use the link below.

QM Rules Won’t Hinder 

Fitch: Final QM Rule to Shape Future Market

January 10, 2013

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While the mortgage market continues its slow trod toward recovery—with distressed liquidations and delinquencies on the decline—industry participants await the final word from lawmakers on one key issue affecting the future of their businesses.

The Consumer Financial Protection Bureau has expressed its intent to announce its final decision on what constitutes a qualified mortgage this year. This, in turn, will give the industry some insight into what can be expected to define a qualified residential mortgage (QRM), according to Fitch Ratings.

“Finalization will, at a minimum, provide clarity to the market and allow institutions, particularly banks, to assess the costs of re-entering the market,” said Suzanne Mistretta, senior director at Fitch.

In addition to anticipated announcements regarding the QM and QRM, Fitch said “key announcements” from the Federal Housing Finance Agency “are supportive of a housing and mortgage market recovery.”

Those “key announcements,” according to Fitch, include new guidelines for representations and warranties and a streamlined short sale process.

To read the complete article please use the link below.

Final QM Rule