Six federal regulators finalized new rules under the Dodd-Frank Act which define the standards of a qualified residential mortgage. The final rule exempts securitizers from retaining 5% of the credit risk on qualifying home loans packaged and sold as securities.
By aligning the definitions of a qualified residential mortgage (QRM) and the qualified mortgage (QM), the standard lenders must follow to demonstrate they have determined a borrower’s ability to repay a mortgage loan, financial regulators have acted to alleviate confusion in the marketplace.
Since 2011, NAHB has worked independently and with a coalition of housing advocates to urge regulators to establish a QRM rule that removes downpayment requirements and other onerous underwriting criteria to keep homeownership affordable for working American families.
In an official statement, NAHB Chairman Kevin Kelly applauded regulators for taking these actions.
“The new QRM rule will encourage sound lending behaviors that support a housing recovery, attract private capital in the mortgage market, help ease tight credit conditions for borrowers, and reduce future defaults without punishing responsible borrowers and lenders,” he said.
FHFA Director Announces Plans to Boost Credit
In another important development this week, Federal Housing Finance Agency Director Mel Watt said that FHFA will announce new details in coming weeks that will specify when financial institutions must repurchase loans from Fannie Mae and Freddie Mac that were issued based on false or inaccurate information.
“I hope our actions provide sufficient certainty to enable your companies to reassess existing credit overlays and more aggressively make responsible loans available to creditworthy borrowers,” Watt said in an Oct. 20 speech at the annual Mortgage Bankers Association conference in Las Vegas.
To further unlock tight credit, Watt also announced plans for Fannie Mae and Freddie Mac to lower their downpayment requirements from 5% to as low as 3%.