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» VISIT US ONLINE @ DSNEWS.COM COVER STORY INSIDE THE BELTWAY MARKET PULSE Qualifying Events INSIDE THE BELTWAY After many months of waiting—and hand-wringing—the QM and QRM rules will soon take effect. But will these new mortgage laws levy too many limits on would-be buyers? By Corry Schiermeyer On October 30, the comment period for the proposed Qualified Residential Mortgage (QRM) rule that will impact qualifying for mortgages backed by HUD or the Federal Housing Agency (FHA), and in turn the majority of all mortgages, came to an end. HUD is expected to release its final QRM rule to coincide with the implementation of the Consumer Financial Protection Bureau's (CFPB) Qualified Mortgage (QM) definition, which goes into effect on January 14, 2014. The CFPB QM definition will apply to HUD- and FHAbacked mortgages until a final rule from HUD is announced. On the one hand, it is good to see the proposed rule, which was revised in August, falls in line with the requirements laid out earlier by the CFPB. This is a good example of streamlining the compliance process and reducing undue burden on lenders and consumers. However, implementation of both the QM and the QRM in January 2014 would lead to even tighter lending practices, with fewer mortgage loans being awarded, ultimately hurting our nation's housing market. While reasonable and responsible regulation creates a sound marketplace, a rush to regulation can be dangerous and will damage our overall economy. Without adequate time, lenders will not have updated documents and processes in place, including updated technology and employee training required to meet the new mortgage regulations. Some lenders have indicated they will stop writing mortgages altogether until they are able to be in compliance. Having the rules in place will lessen uncertainty; however, the complexity in meeting these requirements is not something that can—or should—be rushed. Furthermore, while I applaud the regulators for proposing rules with similar definitions, some of the requirements, on top of already tightened lending standards, will further restrict credit availability and shut out large numbers of qualified buyers, many of whom happen to be lower- to moderate-income earners. Including a debt-to-income ratio of 43 percent, a 30-year term limit on the mortgage, and cutting most interest-only, negative amortization, and balloon loans from the QRM definition seems reasonable. Dropping the minimum down payment requirement is commended, as well. However, there is concern about the point-to-fee limit of 50 percent and the smaller loan threshold, especially as it would impact low- to moderate-income earners and those living in regions where the median home prices are higher. Another concern is the availability of nonqualified mortgage loans. Will lenders take on greater risk by writing non-qualified mortgages, and if so, will they only be offered to high-income earners? With the increased liability on the lenders under Dodd-Frank, the atmosphere may not be amenable to a non-qualified mortgage market. If the QRMs are written too stringently, coupled with an almost non-existent non-QM mortgage market, our economy is sure to suffer as fewer people will qualify for mortgages, and homeownership will suffer as well, especially for the non-wealthy. There are critics on all sides of this issue. On one hand, there are those who believe the rules don't go far enough, that they remain too loose, and would still allow for risky lending. On the other hand, there are those that think the rules go too far and will lead to a reduction in homeownership, especially for minorities and low- to middle-income earners. A balance is needed. Homeownership still remains at the forefront of the American Dream. And the rules and regulations implemented by the government need to ensure a stable housing market and allow for access from potential homebuyers at varied income levels, including middle- and lower-income earners. Corry Schiermeyer is a public affairs professional with more than 20 years' experience, primarily in Washington, D.C., having worked on Capitol Hill and at the White House. For eight years, she served in various senior-level positions in the administration of President George W. Bush. She is currently the chief of staff for the Five Star Institute. 59

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