By John McKechnie
As the mortgage market meltdown continues to fade into the rear view mirror and is gradually replaced by a “new normal” of ﬂat prices and anemic interest rates, Washington is coming to terms with the future of housing ﬁnance. Questions about the nature and level of federal involvement in housing, the system of ﬁnancial supports necessary to maintain a secondary mortgage market, and the extremely thorny issue of how to deal with toxic legacy assets still on the books, are all rising to the level of discussion on Capitol Hill and throughout the administration.
There are three broad areas of policy debate that are likely to emerge in 2013, and each of them will have a real and tangible potential impact on the mortgage business.
First, new rules of the road will mean changes in making, servicing and selling mortgage products. On January 9 the long-awaited Qualiﬁed Mortgage (QM) regulation, mandated by the Dodd-Frank Act, will be issued by the Consumer Financial Protection Bureau. Designed to set an “ability to repay” standard for borrowers, the QM rule attempts to deﬁne a borrower’s “ability to repay” by using a wide variety of factors, including the loan applicant’s income, debt-to-income ratio, credit history and several other factors. Additionally, the rule eliminates no-documentation, stated-income, nonamortizing loans, option ARMs and balloons from the marketplace.
QM is not without controversy. One possible outcome would create a “rebuttable presumption” option that would apply when a borrower is unable to repay a mortgage loan due to unforeseen circumstances such as illness or job loss.continue reading »