Lewis Ranieri, the co-inventor of the MBS, on Wednesday predicted that the new 'qualified residential mortgage' (QRM) rule will push more borrowers into non-QRM loans who would normally qualify for a Fannie Mae or Freddie Mac product.
The proposed risk retention rule exempts GSE guaranteed loans from risk retention — for now. But government officials — members of the GOP in particular — want to wind down Fannie and Freddie because of how much they have cost the government ($142 billion and counting).
Ranieri told reporters the QRM definition will complicate the withdrawal of the government's guarantee from the mortgage market. "So much of the market becomes non-QRM eligible that the ability to withdraw the government is just that much more difficult and that much more stretched out," he said during a press briefing sponsored by home builders and consumer groups.
Consumer advocates noted that the QRM proposal, as written, will require a buyer to put up $43,000 in cash for the downpayment and closing costs to purchase a $172,000 house. It would take the average family 14 years to save that amount, they estimated. (FDIC defines a QRM loan as one where a minimum downpayment of 20% is made.)
The Federal Deposit Insurance Corp. (FDIC) contends the QRM is narrowly drawn because those loans would be exempt from the 5% risk retention requirement in the Dodd-Frank Act.
"I anticipate the QRMs will be a small slice of the market, with greater flexibility provided for loans securitized with risk retention or held in portfolio," FDIC chairman Sheila Bair said.