As I wrote last month, we still haven’t achieved back-to-back-to-back home sale increases, and there are additional issues on the horizon—namely, jobs and credit; more on jobs later.
I recently had a conversation with Frank Murphy, principal of Wynne/Jackson, Inc. concerning possible negative factors in the residential mortgage market. He brought my attention to a white paper prepared by the National Association of Home Builders, the National Association of Realtors, the Mortgage Bankers Association, and others regarding the proposed Qualified Residential Mortgages (QRM) regulation.
This proposed regulation will really hurt our ability to achieve back-to-back-to-back home sale increases. First-time homebuyers will have to choose between higher rates today or a 9- to 14-year delay while they save up the necessary down-payment funds.
First-time homebuyers, however, are not the only ones harmed. The government is penalizing responsible consumers, making home ownership more expensive or simply out of reach for millions.
The increases in down-payment requirements in QRM, for example, a 20 percent increase, will penalize low-risk buyers. The QRM should be aligned with Congressional intent to encourage sound lending that reduces further defaults while keeping home ownership within reach of responsible Americans.
The proposed QRM rule is narrowly drawn, producing a requirement that is misaligned with three key pillars of Congressional intent:
• For consumers, the QRM was intended to provide credit-worthy borrowers access to well-underwritten products. Although Congress intended for QRMs to be broadly available, the regulators acknowledge that they crafted this rule to make the QRM “a very narrow slice” of the market.
• For the housing market, the statutory intent of the QRM was to provide a framework for responsible liquidity provided by private capital that would be broadly available to support housing recovery. However, the QRM definition in the proposed rule is so narrow that the vast majority of both first-time and existing homeowners will face significantly higher interest rates, or have to postpone purchases and refinances.
• For the structure of the housing finance market, the QRM was intended to help shrink government presence in the market, restore competition and mitigate the potential for further consolidation of the market. Again, the proposed rule is likely to have the opposite impact.
I urge regulators to develop a final rule that encourages good lending and borrowing—without punishing credit-worthy consumers.
Ray Utley is president of the land and ranch division at Henry S. Miller Brokerage LLC. Before getting into real estate 30 years ago, he coached football at Southern Methodist University. Contact him at [email protected]
