Qualified Residential Mortgage Rule Seen Forcing More to FHA
The Mortgage Bankers Association has argued before Congress that the proposed definition of qualified residential mortgages will wind up forcing more borrowers into using government-backed loans.
QRMs will be mortgages for which banks and other mortgage-backed security issuers will not have retain part of their risk on their books. As part of the proposal for a definition of those mortgages, federal regulators have suggested significantly higher down payments for QRM loans.
The National Association of Realtors has opposed the proposal on the grounds that it will limit home-ownership. The Mortgage Bankers Association opposes it on the grounds that it will dissuade private financing from the secondary mortgage market and lead to more Americans insuring their loans with the Federal Housing Administration.
"The proposed QRM definition appears to conflict directly with the Obama administration's preference for shrinking FHA from its current role of financing one-third of all mortgages," wrote Michael Berman, chairman of the Mortgage Bankers Association in testimony before the House Financial Services Committee on May 25. "It is not at all clear whether regulators reflected on the relationship between the proposed QRM definition and FHA's eligibility requirements in light of FHA's exemption from risk retention.
"By making it even more difficult for private capital to re-enter the housing finance market, the QRM rule would lead to FHA being flooded with more, not fewer, loans. And while FHA has an important role to play, MBA firmly believes that it is not in the public interest for a government insurance program to dominate the market," he wrote.
He also took aim at the high down payment requirement.
"One of our primary concerns about the proposed QRM rule is the overemphasis on down payment as an indicator of a risky loan. Likewise, we have similar apprehension about legislation to raise FHA's minimum down payment to 5%," he wrote. "We should not be placing such a high emphasis on just one factor."