Housing experts are warning legislators about the unintended consequences of a narrow qualified residential mortgage definition.
Participants in a panel discussion hosted by the Coalition for Sensible Housing Policy highlighted
To harmonize QRM and QM, panelists argued, legislators need to ensure that safe and sound lending protections are put in place “without locking lower-wealth families out of homeownership or unduly restricting the housing market from efficiently accessing private capital.”
According to Julia Gordon of the Center for American Progress, “Low downpayments alone were not the cause of the crisis,” inappropriate underwriting and lack of borrower support also were part of the problem.
What can turn into a problem for the industry now, she added, is failure to synch the rules that “could also entrench the market’s current dependence on government-backed lending since FHA and the GSEs are exempted from the risk retention rule.”
While the Center for Responsible Lending is not against downpayments, said Ken Edwards, a mandated downpayment of 20% or even 10% “would block many qualified low- to moderate-income borrowers from access to mortgage credit, especially African-American and Latino households,” which is why a much tighter downpayment rule will undermine the housing market.
Concerns, however, do not come from customer advocates alone.
“A narrow QRM has will push loans to the GSEs or FHA,” said Mike Fratantoni of the Mortgage Bankers Association, who warned that a narrow QRM will disrupt the flow of private capital into the marketplace.
