Joe Naccarato's Real Estate News You Can Use: What Impact Will QRM Have on Housing Demand?

Friday, June 3, 2011

What Impact Will QRM Have on Housing Demand?

by The KCM Crew on June 3, 2011

The federal government would like to dramatically decrease their role in the financing of residential real estate. To that goal, they have proposed the guidelines for a ‘Qualified Residential Mortgage’ (QRM). How would these proposed guidelines impact the demand for housing? Here is what three different entities are reporting:

CoreLogic

“Roughly 39% of homebuyers in 2010 made a downpayment of less than 20%, loans that may not have been made had the current risk-retention proposal been in place, according to data from CoreLogic.”

The National Foundation for Credit Counseling (NFCC)

The NFCC is the nation’s largest and longest-serving national nonprofit credit counseling network, with nearly 100 Member Agencies and more than 800 offices in communities throughout the United States and Puerto Rico. In a recent survey 50% claimed:
…they would never be able to save enough money for a down-payment.

The Federal Government Itself

According to the FHFA report, less than half the loans originated over the last 12 years would have qualified. Here are the percentages that would have qualified based on the year the loan was originated:

1997 – 20.4%
1998 – 23.3%
1999 – 19.5%
2000 – 16.4%
2001 – 19.4%
2002 – 22.4%
2003 – 24.6%
2004 – 17%
2005 – 14.4%
2006 – 11.5%
2007 – 10.7%
2008 – 17.4%
2009 – 30.5%

We understand that the loans written during the years building up to the bubble were not scrutinized appropriately. However, it seems strange that only 20.4% of the loans issued in 1997 would meet the new criteria.