How great an impact is Dodd-Frank having on mortgage lending?

by. Henry Meier

I want to thank the American Bankers Association for letting me be an honorary member for this post today. As I looked around for stuff to write about what struck me as most interesting and informative came from the banker’s side of the aisle.  

That was the question the Federal Reserve tried to answer in its most recent Survey of Senior Loan Officers and the results provide support for both opponents and proponents of the mortgage lending rule changes. (Incidentally, I would love to report on the same type of survey results for credit unions, our industry should take this on).

Most importantly, while banks are certainly loosening the spigot on mortgage lending, if you don’t qualify for a conforming loan you aren’t going to find it anywhere near as easy to qualify for a mortgage as you did before the meltdown. As summarized by the Federal Reserve: “[t]he majority of banks reported that the new rule has had no effect on the approval rate of prime conforming mortgages, in part because those loans qualify for a safe harbor under the exemption for loans that meet the underwriting criteria of the government-sponsored housing enterprises (GSEs). In contrast, about half of the respondents indicated that the ATR/QM rule has reduced approval rates on applications for prime jumbo home-purchase loans and nontraditional mortgages.“

Dodd-Frank is having a pronounced impact with 47.8% of respondents indicating that they would be approving more prime mortgages but for the QM rules. Interestingly, that is almost the same response the banks gave when asked about not-traditional mortgages.

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