Checking The Pulse Of The Kansas City Real Estate Market

QRM stands for Qualified Residential Mortgage (QRM) and it will change the way mortgage lending is done should the proposed loan regulations be put into effect. Only home buyers who make a 20% down payment would be considered a “Qualified Residential Mortgage”. Since 85% of home buyers today can NOT make a 20% down payment, we’re talking about changes that would have very serious consequences on most home buyers ability to secure a home loan. I’ve seen some estimate it could mean THREE percent higher interest rates for the 85% of home buyers who do not have a 20% down payment. This could definitely be the straw that breaks the camels back.

Higher interest rates would lead to buyers purchasing smaller homes and forcing many who want to buy a home to instead rent. All of this will put downward pressure on home prices at time when we’re looking for ways to promote a real estate recovery. Also consider that mortgage lenders would be required to hold (not sell off) 5% of the non-QRM loans. Again, that’s an estimated 85% of loans made today. Many lenders sell off ALL their loans, so requiring lenders to hold 5% of these loans will lead many lenders to stop making these types of loans. The fewer lenders there are in the market place, the worse off consumers will be.

If some of the estimates I’ve seen are correct, these proposed changed would have eliminated 1/3 of home buyers we’ve seen in recent years. Imagine what that would have done to our housing market.  Going forward, the buyers who would still buy a home under the new guidelines will surely have to buy much smaller homes. That would hang many moderate and upper bracket homeowners/home sellers out to dry… which is the last thing the housing market needs. Fortunately multiple powerful groups are fighting these proposed changes. The groups include AFL-CIO, NAR, SEIU, NAACP and NAHB, among many others.

Posted by Jason Brown