Importantly, new data within the paper indicates the underwriting and loan product limitations mandated through QM effectively limit the risk of default without excluding large numbers of creditworthy borrowers. This new analysis by The Urban Institute shows the new proposed QRM will reduce the risk of default and delinquency by more than half:
- Loans purchased by Freddie Mac and Fannie Mae that met the re-proposed QRM standard had default rates of 4.1 percent as compared to 8.7 percent for mortgages that did not qualify for QM status.
- The delinquency rate for mortgages in private label securities originated in or prior to 2013, that did not meet the re-proposed QRM standard, was 30.6 percent. The delinquency rate for purchase and refinance loans that met the new QRM proposal was nearly two thirds lower at 12.6 percent.
“In synchronizing the definition of QRM with QM, the revised rule will encourage safe and financially prudent mortgage lending, while also creating more opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market,” the paper concluded. “Most importantly, it will help ensure creditworthy homebuyers have access to safe mortgage financing with lower risk of default.”
The Coalition for Sensible Housing policy, of which NHC is a member, brings together a wide range of housing stakeholders. See the full coalition list at the Coalition for Sensible Housing Policy website.
The entire white paper can be found here.