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What are QRMS? Qualifying Residential Mortgages--And They're Bad For The Real Estate Industry

If you haven't read about the new QRM requirements being proposed by congress, I wrote a piece about it today on the Seattle P-I.  Basically, lenders will need to lend under large downpayment, low-risk guidelines set by the feds, or they'll have to maintain large assets to satisfy the risk-reserve requirements set for them.
Seattle P-I QRMs

This well-intentioned plan is going to do more damage to small businesses and the real estate market than it could possibly help in terms of reducing risk.  I'm not opposed to requiring a substantial down payment on home purchases, but this plan will only force small lenders out of business and raise overall costs and barriers for banks and borrowers. 
  • May 25 2011 - Downtown
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Answers (5)

In my opinion lenders who do a lot of mon-conforming loans which don't meet the definition will be impacted.  Lenders who stick to Fannie, Freddie, FHA, VA & USDA programs will have minimal impact since it's rumored that all of those programs will be exempt from the lender maintaining 10% liquidity, etc.
  • May 25 2011
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And that will be fine for most, Shane, as long as FHA, Fannie, etc. are still available a couple of years down the road, but there are always threats to scale them back.  Any further restrictions on lending right now are only going to choke the market back further.
  • May 25 2011
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True, if they are still around, but if they aren't around, I feel the market will feel a huge negative impact from them leaving, much moreso than the effect QRM's will have.  But imposing the QRM requirement will limit the capacity and capabilities entrepreneurs can start up new lending outlets/loan programs.  If you let the private market go crazy again then a whole 'nother sub-prime debacle could happen where you have lenders not really caring if the loans will get repaid or not.  I suspect for the non-QRM mortgage lenders who are still around, will have to mark up their rate prices in order to accommodate the these upcoming requirements.

Basically I feel it will have positive and negative effects
  • May 25 2011
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Sam, the government should get out lending completely. No QRM, no fannie, no freddie, no fha, nothing. Then the banks would be free to set their level of risk.

20% down sounds like a solid idea for stable long term ownership to me.
  • May 25 2011
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Purely private lending is an attractive idea.  It would take some time to create a market-based secondary market as opposed to Fannie, Freddie, and FHA scooping everything up. 
  • May 26 2011
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