The REALTOR® community welcomed a new rule proposed by federal regulators that would make mortgage standards less restrictive. Announced on Aug. 28, the proposed revisions to the Qualified Residential Mortgage (QRM) rule will help millions of people buy homes and strengthen the mortgage market, according to the National Association of REALTORS® (NAR).
The new plan does not require specific down payment rules that the previous version of QRM would have created. The plan aligns QRM with the Consumer Financial Protection Bureau's Qualified Mortgage (QM) rule, which requires borrowers provide income documentation that they can repay the loan, and that their debt-to-income ratio does not exceed 43 percent, among other requirements. Lenders are not required to set a down payment amount. The new rule would not apply to Fannie Mae and Freddie Mac for as long as they remain under federal control.
Under the first QRM rule proposed in April 2011, lenders would have required a 20 percent down payment from borrowers. NAR and other housing advocates, including the mortgage industry, opposed that rule because they believe the steep down payment requirement would shut out many qualified and responsible low- to middle-income borrowers from acquiring low-cost and safe mortgages.
The new proposal is "a victory for homebuyers and the future of homeownership in this country," said NAR president Gary Thomas. "We applaud the regulators for removing the 20 percent down payment requirement and for adopting reasonable credit and debt-to-income standards."
Along with the proposal is a second approach that requires a 30 percent down payment in order for borrowers to qualify for a QRM loan. NAR opposes this alternative, which Thomas describes as "a restrictive measure that dramatically favors the wealthy."
"Research shows that it would take the average American more than 25 years to save enough money to buy a modest home with a 30 percent down payment," said Thomas.
Carolyn Miller, president of the Silicon Valley Association of REALTORS®, said in high cost areas like California, a high down payment requirement would price many buyers out of the market place. "In the current market environment, because of the stiff competition among buyers, many are putting 20 to 30 percent down, but to make it a requirement would be unreasonable and disqualify many creditworthy borrowers," said Miller.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.