Standards for a Qualified Mortgage – “QM” – Could Have Major Market Impact
The new Bureau of Consumer Financial Protection (CFPB) will be responsible for defining a nationwide standard for a QM, thereby setting the consumer guidelines banks and lending institutions must follow before issuing a mortgage. (Read more here)
The idea of a QM is centered around “ability to pay”. If those standards include new loan limits and changes to the way debt is calculated, including future debt such as students loans, the QM is sure to hurt the market by taking an estimated 10%-25% (conservatively) of present borrowers right out the pool. You might think that in affluent areas such as Malibu, Calabasas, Palisades etc., that this will not matter too much, but you would be very wrong. The reason is that a great many of our entry and mid range buyers come from someplace else in the market and it takes EVERYONE being able to move their property to keep feeding the pipeline upward.
Congress is pressuring is pressuring the Federal Housing Finance Agency to not put QM into action on Jan. 10, 2014. This is not the time to roll back loan amounts and put the squeeze on real estate, and it seems Congress gets that (perhaps with a little Real Estate and Builder industry “enlightenment”).
Congress is claiming that FHFA can’t enact this without, well – an Act of Congress! We can use an Act of Congress right about now (at least in this case). In a nutshell, keep doing what you need to, lock in your loans and rates — and if you don’t, there may yet be a light at the end of the tunnel. Fingers crossed the light is not a train!