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Lenders hope to earn bigger profits by originating loans that fall outside the qualified mortgage guidelines, for which they can charge borrowers significantly higher interest rates. But legal risks remain.
July 1 -
Despite a strong industry push, a bill to amend the Consumer Financial Protection Bureau's "qualified mortgage" rule is facing an uphill battle to enactment this year.
April 16 -
Lenders desperately want to make potentially lucrative home loans to those with less-than-stellar credit, but only a few are willing to try given legal uncertainties. Here's how a few are designing their products to get a jump on the competition.
October 1
The Consumer Financial Protection Bureau's "qualified mortgage" rule has put a damper on the recovery of the housing market, according to an American Bankers Association survey.
The vast majority of new residential mortgages about 90% issued in 2014 were classified as qualified mortgages, or QM, meaning they must meet stricter standards for credit quality, the ABA said, citing results from its yearly Real Estate Lending Survey.
Additionally, about 78% of the survey's respondents said they expect a continued reduction in available credit due to the QM rules, which went into effect in January 2014.
The rules are making it harder for consumers to access credit to buy a home, said Robert Davis, an executive vice president at the ABA.
"As expected, the ability-to-repay and QM rules have dampened the housing market recovery," Davis said in a news release. Now "should be the ideal time to buy a home," he said.
Mortgage loans don't meet QM standards largely because of applicants' high debt-to-income levels and a lack of documentation proving income, the ABA said.
The ABA's survey included some positive news. The survey's responding banks reported making a large percentage of loans to first-time homebuyers. Additionally, foreclosure rates dropped to 0.57% in 2014, from 0.78% in 2013.
The 30-year fixed-rate mortgage remains dominant loan type in residential lending, accounting for 50.5% of all loans in 2014 slightly up from 50.3% in 2013.
