A congressional panel meeting today is trying to figure out what’s a safe mortgage loan and what’s too risky. What they decide may well influence how hard it is for you to refinance your existing mortgage, or to get a loan to buy a new home.
If the rules defining safe mortgage are set too strictly, the cost and availability of mortgages will rise, THE NATIONAL ASSOCIATION OF REALTORS® vice president Scott Louser told the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
Congress has taken up the issue, called the Qualified Mortgage rule, because it wants to make sure mortgage lenders don’t make loans to people who can’t pay them back.
“One of the greatest issues affecting the housing market is uncertainty in the rules that govern housing finance,” said Louser. “The first step to creating certainty in the housing finance system is to broadly define QM so that it encompasses the vast majority of the safe, high-quality lending being done today.”
The rules lenders currently use to underwrite mortgages are already tight and are contributing to the slow housing market recovery. Further tightening the rules would only cover a small number of additional borrowers and would hurt the housing recovery.
Borrowers that fall outside the QM market would have to pay more for their loans or may not be able to get financing at all.
NAR thinks QM should give lenders incentives to make well-underwritten mortgages affordable and abundantly available to all creditworthy borrowers. To do that, the rule has to be clear and give lenders assurance that if they follow the rules, they can’t be sued.
“Creating a broad QM that establishes strong consumer protections, promotes mortgage liquidity, incorporates important ability-to-repay standards, and offers lenders a safe harbor that reduces litigation exposure benefits lenders, investors, and consumers will help ensure the revival of the home lending market,” said Louser.