Thursday, August 4, 2011

NHC’s Ethan Handelman asserts the importance of getting QRM right

In a Bloomberg wire story this week, NHC Vice President for Policy and Advocacy Ethan Handelman emphasized the importance of getting the new Qualified Residential Mortgage (QRM) definition right from the beginning.

“This is the first step in reshaping our housing finance system,” Handelman said, referring to the forthcoming decision federal regulators will make on which mortgages should be considered low-risk. “It has implications far beyond the specific step it takes. It sets you on a path.”

Acting on two mandates of the Dodd-Frank Act, federal regulators initially proposed a risk retention rule defining QRMs as requiring a minimum 20% down payment and top credit scores from borrowers. (QRMs would be exempt from a risk-retention standard requiring that sponsors of asset-backed securities retain at least five percent of the credit risk of the assets.) After NHC and other housing groups joined in criticizing the proposal, regulators extended the deadline for comments to August 1.

NHC has joined other industry and advocacy groups in criticizing the new QRM definition proposed by federal regulators. In comments to regulators, NHC argued that the minimum down payment and credit requirements would make loans with good terms harder to come by for low- and moderate-income borrowers. A recent Washington Post column asserted that the proposed down payment rules would disproportionately affect minorities.

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