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UNC Conducts Study on QRM Rule

According to a recent report from the ""Center for Community Capital"":www.ccc.unc.edu/ at the ""University of North Carolina"":www.unc.edu/, the new regulations surrounding qualified-residential mortgages will require creditworthy borrowers to take on a heavier financial burden when purchasing a mortgage, and many potential buyers may be pushed out of the mortgage market altogether.


The controversial QRM rule, which is contained in the Dodd-Frank Act, has been the subject of lengthy debates since it was first proposed, and the regulatory move is largely unpopular both on Capitol Hill and Wall Street.

Apart from raising down payment standards for borrowers, the QRM rule also mandates that lenders choosing to extend loans falling below the 20 percent down payment requirement maintain 5 percent ownership of the loan.


It's a risk mitigation proposal that many inside the industry feel would stifle mortgage lending to a profound degree, considering the number of home owners who've lost valuable equity since the housing crisis.

Based on the findings from UNC's Center for Community Capital, a QRM mandate of even 10 percent could reduce the nation's pool of borrowers by as much as 38 percent. When looking at the current 20 percent threshold established by the rule, the Center found that nearly 61 percent of the country's borrowers would be unable to qualify.

Commenting on its survey, the Center stated that the ultimate goal - reducing foreclosures - would not ""necessarily outweigh the costs of reducing borrowers├â┬ó├óÔÇÜ┬¼├óÔÇ×┬ó access"" to mortgage loans.

In a statement from the organization, the Center also noted that African American and Latino consumers were likely to be the most negatively affected groups should the government proceed with the QRM regulations. The Center's study recommended that only the riskiest loan types be subject to QRM requirements, such as interest-only loans or loans extended with no income documents.

Elaborating on its suggestions, the Center added, ├â┬ó├óÔÇÜ┬¼├àÔÇ£While higher down payments do result in fewer defaults, the payoff is small relative to the number of creditworthy households who could be shut out of the market, the study shows.""

About Author: Abby Gregory


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