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Wednesday, December 21, 2011
Sunday, June 19, 2011
What is QRM???????
Qualified Residential Mortgage....
And so....what does that mean? Well, that really hasn't been decided yet.
With the passage of the Dodd-Frank bill in 2010, banks & lending institutions will be required to hold 5% of any loans bundled & sold as securities on the secondary marketplace. This seems like a reasonable reaction ~ given that the banks may not have lent out & sold so many loans (or been more selective with the individuals to whom they lent the money) if they were forced to keep some of those loans themselves.
Because not all loans made, packaged & sold off were "root causes" of the mortgage & real estate market collapse; congress wrote in a loop-hole. This loop-hole is "Qualified Residential Mortgages." If a "qualified" mortgage is written, it is not subject to the 5% hold-back ~ therefore being a cheaper loan to obtain. Because if the bank has less capital to lend out (due to higher reserve requirements), they will charge those who don't "qualify" a much higher rate & fee. Some are saying as much as 3% more on the interest rate!!!!!!!
So again, I ask, what are the qualifications?!?!?!?! The uncertainty of this & other factors has played havoc with the financial markets over the last few months. Here are the "options" on the table for discussion at this point...
And so....what does that mean? Well, that really hasn't been decided yet.
With the passage of the Dodd-Frank bill in 2010, banks & lending institutions will be required to hold 5% of any loans bundled & sold as securities on the secondary marketplace. This seems like a reasonable reaction ~ given that the banks may not have lent out & sold so many loans (or been more selective with the individuals to whom they lent the money) if they were forced to keep some of those loans themselves.
Because not all loans made, packaged & sold off were "root causes" of the mortgage & real estate market collapse; congress wrote in a loop-hole. This loop-hole is "Qualified Residential Mortgages." If a "qualified" mortgage is written, it is not subject to the 5% hold-back ~ therefore being a cheaper loan to obtain. Because if the bank has less capital to lend out (due to higher reserve requirements), they will charge those who don't "qualify" a much higher rate & fee. Some are saying as much as 3% more on the interest rate!!!!!!!
So again, I ask, what are the qualifications?!?!?!?! The uncertainty of this & other factors has played havoc with the financial markets over the last few months. Here are the "options" on the table for discussion at this point...
- A minimum 20% down payment OR an alternate proposal outlining a minimum 10% down payment and mortgage insurance. Loan-to-value ratios could be higher for refinances.
- Mortgage debt equal to 28% of income and total debt equal to 36% of income. The alternate proposal could seek comment on more liberal ratios of 33% and 41%, under certain circumstances. (Currently those ratios are higher ~ near 50% on the total debt for instance, which is significantly lower than the lax guidelines followed in the "boom" years).
- Interest-only loans will never be "qualified"; and neither will most adjustable rate mortgages ~ unless there is proof that the buyer can pay a higher rate if it adjusts.
- Amy loan that is packaged & sold to Fannie Mae or Freddie Mac will always be a "qualified" loan because Fannie/Freddie guidelines have to be met in order for them to buy the loan from the lender.
“I don’t think anyone has a good grip on all the potential unintended consequences of this,”
Mark Zandi, chief economist at Moody’s Analytics
Just on the Down Payment proposal, 40% of last year's sales would not have taken place. YIKES!!!!!! All-in-all, we need to realize that mortgages are NOT getting easier to obtain. The final definition of a "Qualified Residential Mortgage" will determine who can buy or refinance their homes. Many would-be buyers could be pushed out of the market to save more for a down payment or pay off additional debts.
This seems like a good idea, but when you pull back the layers, you'll see that the banks will STILL lend out money to people who don't fall into these categories....it will just COST us all a lot more.
Saturday, April 16, 2011
The TRUTH from a trusted source ~ with facts, stats & industry experts to back it up!
As the name states... "Keeping Current MATTERS!"
As the 8th consecutive year, 2010 was another successful year for our team with Baird & Warner. One of the many tools in our box of tricks is the daily blog & monthly updates (critical in a volatile market) that Keeping Current Matters provides us.
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