Qualified Residential Mortgage proposal
The above video is of Realtor Magazine Senior Editor, Robert Freedman and Ken Fears, Manager of National Association of Realtors (NAR) Regional Economics discussing how the current proposal to require 20% down on all mortgages would impact the housing sector.
According to the Federal Reserve Board, “Six federal agencies have approved and will submit a Federal Register notice that extends the comment period on the proposed rules to implement the credit risk retention requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The comment period was extended to August 1, 2011, to allow interested persons more time to analyze the issues and prepare their comments. Originally, comments were due by June 10, 2011.”
In light of the extension, Freedman writes, “The good news is that Congress has heard the concerns of NAR and others and asked banking regulators, who proposed the rule, to push back its deadline for accepting public comments on its rule. Dozens of members of the Senate and almost 150 members of the House wrote to the banking regulators asking them to delay the comment deadline, and regulators responded with an extension to August 1 from June 10. The delay makes clear that regulators heard Congress’ concerns about moving too quickly on such a potentially destabilizing rule.”
QRM and the housing crisis
While the housing crisis is still in full swing and history hasn’t written itself yet, there is not a consensus as to where the finger of blame should be pointed, but there is most definitely a consensus that housing is a disaster. Home prices continue to slip in all major metropolitan areas besides D.C., sales of existing and new homes aren’t what anyone would consider to be hot, and although mortgage rates are reasonable, some claim they will soon rise regardless of the status of the economy. One top economist says that there is no double dip yet because we haven’t even hit the bottom. Uh oh.
NAR critics will call the video above fear mongering, but all of the economic indicators we closely monitor are consistent with their claims and we agree that the QRM proposal would be detrimental to the housing sector.
Click here if you cannot see the video above. AGBeat is not affiliated with NAR.
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Bruce Lemieux
June 13, 2011 at 8:08 am
These two guys do a terrible job of explaining and arguing the merits of their counter-proposal. If I understood them correctly, it's bad to have the banks keep a 5% stake in loans that don't meet QRM guidelines of 20% down plus other stuff. Instead, they argue for lower down payments and MIP to cover the additional risk. Seems logical to me this would raise the cost of a loan. Now, if a bank has to charge the consumer more for a non QRM loan to cover the additional risk, then the loan cost is still going up. The difference: the bank is covering additional risk instead of the government. Isn't that a better scenario?
To me, it sounds like NAR is basically saying 'Don't make any real changes'. Keep low down payments, require MIP for all loans with less than 20% down, tighten up underwriting (but not too much – don't want to keep someone from buying a home), and insure securitized loans so that banks and investors are off the hook for any risk.
For our housing to stand on its own feet, the government can't continue subsidizing private home ownership at such a high level. And, the banks and investors who buy mortgages must take on the risk of keeping the loans. Yes, interest rates will go up. Yes, many people would be unable to buy a home. But that must be the end-game in any scenario.
If this video is representative of how NAR lobbies our behalf, then they aren't helping to influence a reasonable way out of the housing mess.
Jonathan Benya
June 14, 2011 at 9:32 pm
This sort of crap is why Realtors are disenfranchised with NAR. This is a massive risk to our industry, folks, and NAR comes up with ineffectual arguments like this? What happened to the slick marketing and lobbying of the boom years?