Revised QRM Rule may contain good and bad news


The Federal Reserve, FDIC, OCC, SEC, FHFA, and HUD will purportedly soon release for comment a new Qualified Residential Mortgage (QRM) Rule that may align with the Qualified Mortgage (QM) Rule so that the QRM exemption is closer to the QM designation. It is rumored that the proposed revision would require that the 5% risk retention requirement for securitized, non-QRM mortgages be triggered if the borrower’s DTI (debt-to-income ratio) is higher than 43% (which is the DTI level in the QM rule). The current proposal sets the DTI level at 36%. This is the good news of the rumored proposal. However, there is speculation that the proposal may also increase the down payment requirement from 20% to 30%, which some speculate will offset the benefit of increasing the retention trigger and lead to contraction in the mortgage market, the opposite of what industry, consumer groups, and Capitol Hill had hoped. The proposal is expected to be published by the end of August.

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