‘Qualified mortgage’ progresses New regulation intended to make home loans less risky for lenders
By Alan J. Heavens The Philadelphia Inquirer
The Consumer Finance Protection Bureau unveiled its long-anticipated “qualified mortgage” regulation this
Shane Lambert, CIP
past week, designed to guarantee that home loans be given only to borrowers able to repay them. Under the new regulation, a lender must obtain and verify an
applicant’s financial information, including employment status, income, assets, debts and credit history; the prospective borrower must have enough income or assets to repay the loans, and teaser rates may no longer hide the true cost of a mortgage. When it was first pro-
posed more than a year ago, the regulation — essentially a redefinition that takes effect next January — created worries among lenders and the housing industry that it would effectively close off home ownership to millions of Americans and derail the real estate recovery.
Tallahassee Builders Association Weekly News
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Tallahassee Joins List of Improving Housing Markets The Tallahassee-area housing market is officially “improving” according to the latest National Association of Home Builders/ First American Improving Markets Index (IMI), which rose for a fifth consecutive month to 242 housing markets around the nation in January, 2013. This is up from 201 markets listed as improving in December, and includes entrants from 48 states and the District of Columbia.
prices across a broader number of metropolitan areas,” noted NAHB Chief Economist David Crowe. “Similar home price gains, and hence the IMI, may be tempered in the future as we see data from typically slower months for home sales.”
The IMI identifies metro areas that have shown improvement from their respective troughs in housing permits, employment and house prices for at least six consecutive months.
“Potential home buyers should be encouraged by the positive momentum in home prices, permitting and employment that is increasingly evident in not just isolated housing markets, but a broadening swath of the country,” added Kurt Pfotenhauer, vice chairman of First American Title Insurance Company.
Including Tallahassee, a total of 47 new metro areas were added to the list and six were dropped from it this month. Newly added metros include such geographically diverse locations as Los Angeles, Calif.; Auburn, Ala.; Des Moines, Iowa; Nashville, Tenn.; Richmond, Va.; and Cleveland, Ohio.
Karen Koelemi, right, of Orange State Construction in Tallahassee will represent the Florida Home Builders Association (FHBA) and the Tallahassee Builders Association (TBA) at the National Association of Home Builders-sponsored International Builders Show in Las Vegas next week. Koelemij, pictured with her father John (a TBA, FHBA, and NAHB Past President) is a Past President of TBA and serves as FHBA’s State Representative to NAHB.
The IMI is designed to track housing markets throughout the country that are showing signs of improving economic health. The index measures three sets of independent monthly data to get a mark on the top improving Metropolitan Statistical Areas. The three indicators that are analyzed are employment growth from the Bureau of Labor Statistics, housing price appreciation from Freddie Mac and single-family housing permit growth from the U.S. Census Bureau. NAHB uses the latest available data from these sources to generate a list of improving markets. A metropolitan area must see “The IMI has almost doubled in the past improvement in all three measures for at two months as stronger demand during least six consecutive months following prime home buying season boosted those measures’ respective troughs
“We created the improving markets list in September of 2011 to spotlight individual metros where – contrary to the national headlines – housing markets were on the mend,” noted NAHB Chairman Barry Rutenberg, a home builder from Gainesville. “Today, 242 out of 361 metros nationwide appear on that list, including representatives from almost every state in the country. The story is no longer about exceptions to the rule, but about the growing breadth of the housing recovery even as overly strict mortgage requirements hold back the pace of improvement.”
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before being included on the improving markets list. A complete list of all 242 metropolitan areas currently on the IMI, and separate breakouts of metros newly added to or dropped from the list in January, is available at www.nahb.org/imi. A stateby-state listing of metro areas on the list is also available at: www.nahb.org/ improvingmarkets. In addition to Tallahassee, the Florida markets on the list are Cape Coral, Deltona, Jacksonville, Lakeland, Miami, Naples, North Port, Ocala, Orlando, y, Palm Bay, Panama City, Pensacola, Punta Gorda, and Tampa.
The version announced Thursday appears to have addressed many, though not all, of the concerns expressed by consumer groups in addition to the industry. “We think the rule will help consumers avoid bad loans,” said Pamela Banks, senior policy counsel for Consumers Union. “We urge (the bureau) to keep the pressure on to ensure all mortgages offered to consumers are fair and appropriate.” But Mike Calhoun, president of the Center for Responsible Lending, said the regulation left a “pivotal” issue unresolved: how the fee a lender pays to a mortgage broker will be counted when it comes to defining a qualified mortgage. “These fees, known as yield-spread premiums, provided incentives for brokers to steer borrowers into bad mortgages that fueled the mortgage crisis,” Calhoun said. The bureau should not create a loophole that allows high-fee loans to count as qualified mortgages, he said. Barry Rutenberg, chairman of the National Association of Home Builders, noting that the regulation will take effect in 2014, said it was essential that regulators act prudently and thoughtfully to implement it in a sensible manner “to avoid disruptions to the housing finance system and ensure qual-
ified borrowers can obtain affordable credit.” American Bankers Association President Frank Keating said that while the regulation codifies many conservative lending standards currently in place, “it is complex and technical, presenting an additional regulatory burden.” The qualified-mortgage regulation must mesh well with others that the Consumer Financial Protection Bureau will be crafting this month, Keating said, because all “will transform our lending practices and could restrict access to credit.” Included in the new regulation, the bureau said, are protections for borrowers from risky lending practices such as the no-documentation and interest-only mortgages that contributed to many homeowners ending up in delinquency and foreclosure after the 2008 collapse of the housing market. The regulation features a cap on how much housing income can go toward debt — debt-toincome ratios less than or equal to 43 percent. Before the crisis, the bureau said, many consumers took on mortgages that raised their debt levels so high that it was nearly impossible for them to repay the mortgages, given the total of their financial obligations, including car loans and credit-card bills.
“We think the rule will help consumers avoid bad loans. We urge (the bureau) to keep the pressure on to ensure all mortgages offered to consumers are fair and appropriate.” PAMELA BANKS, senior policy counsel for Consumers Union