Mortgage rates are at all-time lows, but not everyone will enjoy the benefits if a new proposal goes into effect. In fact, nearly 25 million homeowners across the country would be facing more expensive mortgages if the proposal remains unchanged.
Provisions in the Dodd–Frank Wall Street Reform and Consumer Protection Act would require applicant to have at least 25 percent in home equity t0 qualify for a lower-rate mortgage – a “Qualified Residential Mortgage” (QRM). An analysis of the CoreLogic data by the Coalition for Sensible Housing Policy reveals that more than half of U.S. homeowners would not be eligible for QRMs. Approximately 24.8 million U.S. homeowners have less than 25 percent equity in their homes. According to the National Association of REALTORS®, consumers in a non-QRM loan could be forced to pay between 0.80 and 1.85 percentage points more in interest rates because they don’t meet the down payment or equity requirements.
The Coalition for Sensible Housing Policy is a group of more than 40 consumer organizations, civil rights groups, lenders, real estate professionals and insurers. They say that should these new risk retention regulations go into effect, the cost of entry would disqualify even creditworthy home buyers. The solution, according to the Coalition, is to redesign QRMs to encourage sound lending behaviors that reduce future defaults without harming responsible borrowers and lenders. By practicing sound underwriting and creating solid programs in regards to income and mortgage types, default rates can be reduced without penalizing responsible borrowers.
For more information on the proposed QRM rule, visit www.SensibleHousingPolicy.org.
[Article by Neil Williams of MortgageFit]