NAR Applauds Regulators For Aligning QRM With QM, Assuring Safe Lending

Revised rules proposed by federal regulators will help ensure rigorous and effective underwriting, while also providing creditworthy home buyers with access to safe mortgage financing, according to the National Association of Realtors (NAR).

NAR says by synchronizing qualified residential mortgage (QRM) standards with those applied to the related qualified mortgage (QM) rule, the re-proposed rules are stringent enough to protect consumers from unscrupulous lending practices and create new opportunities for private capital to re-establish itself in the mortgage market.

Gary Thomas, president of NAR and broker-owner of Evergreen Realty, comments, ‘Aligning the QRM definition with the QM definition removes the risky product features and low- or no-documentation lending that led to increased defaults, without excluding those buyers who are unable to afford a high down payment.’

NAR also criticized regulators' alternative proposal – which would require a 30% down payment from buyers – as being unduly narrow and unnecessary to assure safe and sound mortgage lending.

According to NAR, the demand for high down payments ignores strong evidence that responsible lending standards and ensuring a borrower's ability to repay have the greatest impact on reducing lender risk. The low foreclosure rate of Veterans Affairs loans, which have the lowest down payment requirements and relatively low default rates, is further evidence that the key to safe lending is sound underwriting and documentation, rather than high down payments, says NAR.

NAR adds that Realtors were among the most vocal opponents of the first QRM rule proposed in April 2011. This rule included a 20% down payment requirement that would have, according to NAR, denied millions of creditworthy Americans access to the lowest cost and safest mortgages. NAR says it preferred a rule that would not include a down payment requirement and would adopt reasonable credit and debt-to-income standards.

NAR says it supports the proposed rule's treatment of the government-sponsored enterprises (GSEs) while in conservatorship, as the guaranty provided by the GSEs will satisfy the rule's risk retention requirements.

According to NAR, the GSEs continue to play a crucial role in providing affordable and available financing to consumers during the economic downturn. Until the statutory and regulatory framework for the GSEs becomes clear, the agencies should not impose risk retention standards that would prevent qualified home buyers from finding fair and affordable mortgages, says NAR.

NAR adds that there is broad support for the regulators' re-proposed QRM rule among banking, housing and consumer advocacy groups – who have formed the Coalition for Sensible Housing Policy, which includes NAR and 52 other organizations focused on drawing attention to the proposed regulation.


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