How QM Rule Has Impacted Lending So Far

February 18, 2014

In January, the qualified mortgage rule took effect, which aims to protect consumers by strengthening underwriting standards.

The QM rule requires all mortgage applicants to do full documentation of income, assets, and employment; have a maximum of 3 percent for points and fees; and has a cap of 43 percent on the back-end debt-to-income ratio, among other requirements. Some critics have feared the new rules will raise mortgage costs and reduce access to credit for consumers.

NAR Research recently surveyed a sample of lenders to find out the impact to lending since the new rule took effect. Among the findings:  

  • 55 percent of survey respondents say the QM rule would impact 2.6 percent to 20 percent of their mortgage originations.
  • 60 percent of lenders indicate they were most concerned about the impact of the 3 percent cap on points and fees.
  • 45 percent of lenders say they would not originate non-QM mortgages, while a majority said they would defer to investors' preferences on how to treat non-QM loans.
  • About a fifth of lenders surveyed say they did not know whether they would charge non-QM borrowers higher rates. However, the most frequently cited change for prime and near-prime borrowers was a rise of 50 to 75 basis points and 150 basis points for subprime.

“Consumers should expect to have to document their income, employment, and resources,” writes Ken Fears, manager of Regional Economics and Housing Finance Policy for NAR’s Economists’ Outlook blog. “If your client has a high debt-to-income ratio, the FHA, as well as Fannie Mae and Freddie Mac, will be more lenient than private financers.”

View more of the survey results at NAR’s Economists’ Outlook blog.

Source: “Planning Done: Measuring the QM Rule’s Impact,” National Association of REALTORS® Economists’ Outlook Blog (Feb. 15, 2014)

Read more:

QM Requirements Limit Consumer Options, NAR Says
Analysis: Mortgage Availability Tightening with QM?