Does this type of loan look familiar?
• A minimum 20% down
• An owner occupied property only
• Mortgage debt service to income no greater than 28%
• No prior defaults, judgments, or BKs
• Only straight 30-year mortgages; no balloon payments, no interest only, no negative amortizationThis is the proposed outline for the new QRM or Qualified Residential Mortgage in the US. Took 2 years to think this out, but that aside, it's purpose is to stop the fraudulent lending practises of 2005 – 2007.
The new guidelines don't exclude loans that can't meet these requirements, but they set the lending standard. Loans that don't reach the bar will force lenders to retain 5% of the risk in every mortgage they take on.
A future problem has been stated that the bigger risk loan will cost more, making buying a house as hard as ever and may force a situation of fewer borrowers and lower prices.
No matter what dire outcome may be ahead, the proposal by the Federal Reserve, which is required under the Dodd-Frank financial reform law, suggests that lenders would be required to ensure borrowers have the means to repay their mortgages before making a loan to them. Golleeee Mary Daisy Dinkle, that's just brilliant!.
Ian
http://theblockblog.com
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