Pending QM, DFA Rules Could Clip Originations by 600,000 Units

The combination of Dodd-Frank Act mortgage rules and the Basel III capital standards could perpetuate today’s tight credit conditions, according to a new study from conservative think tank American Action Forum.

As proposed, the qualified mortgage rule, and the Basel III accords relating to MSRs and capital will “tighten access to credit beyond pre-boom standards,” undermining long-term growth of the housing market and the U.S. economy, the AAF says.

The authors of the housing finance study estimate the pending rules could result in 20% fewer loan originations and 600,000 less home sales over the next few years.

One of the authors, AAF president Douglas Holtz-Eakin, is a former Congressional Budget Office director (2003-2005) and served as an economic advisor to presidential candidate Sen. John McCain, R. Ariz.,  in 2008.

The authors expect the regulators will release the final QM, QRM and Basel III regulations in January, though there is new speculation that it may be unveiled in late November or December.   

“If done correctly, they could provide the safety and security for both consumers and investors necessary to sustain a housing recovery and beyond.  But if regulations are implemented in an overly strict fashion, they will lower the trajectory for homeownership and the economy for generations to come,” the eight-page study says.