The Northern Virginia Real Estate market continues on it strong pace but there is legislation that can bring this to an end – and fast. The legislation is known as Qualified Residential Mortgages. NAR believes Congress intended to create a broad QRM exemption. Evidence shows that responsible lending standards and ensuring a borrower’s ability to repay have the greatest impact on reducing lender risk, not high down payments. Proposals that require high down payments will drive more borrowers to FHA, increase costs for borrowers by raising interest rates and fees, and effectively price many eligible borrowers out of the housing market.
A provision in the Dodd-Frank Act requires that financial institutions retain 5% of the risk on loans they securitize. The purpose is to discourage excessive risk taking and create strong incentives for responsible lending and borrowing.
Congress came up with the QRM concept to ensure that banks were only putting up ‘safe’ loans for securitization. NAR supports this goal, but in practice, regulators have come up with draconian parameters for what constitutes a QRM.
NAR feels this will not only affect buyers, but would also affect the ability of home owners to sell their homes, since there would be fewer buyers who could qualify for home ownership.
NAR wants federal regulators to honor Congressional intent by crafting a QRM exemption that includes a wide variety of traditionally safe, well underwritten products such as 30-, 15-, and 10-year fixed-rate loans; 7-1 and 5-1 ARMs; and loans with down payments in the 5% to 20% range with PMI, where required, and with other features found in low-risk loans such as no prepayment penalties or balloon. Implementing a new rule requiring a twenty percent or higher down-payments would stop the housing recovery in its tracks and we can’t have this happen to our fragile recovery in the housing sector. Please contact your elected officials today and have them stop this in its tracks. If you are interested in receiving a letter to forward on, please let me know.
I would like to thank NAR for allowing me to take their words and post this for you.
Now, go sell something!