Federal regulators have drafted a 'qualified residential mortgage' (QRM) rule that mandates a 20% downpayment for such loans while leaving mortgage insurance totally out of the equation — a move that could prolong the housing recession in several states and decimate the mortgage insurance industry.
A final rule is expected to be issued within two weeks with a 60-day comment period to follow.
Glen Corso, managing director of The Community Mortgage Banking Project, noted that "this rule doesn't matter if you have MI," adding that for many borrowers in hard hit housing states such as Arizona, California, Florida, Michigan, and Nevada "they will be out of the QRM market for years to come. How can these people refinance into a QRM loan?"
Corso, whose trade group members include both nonbanks and depositories, said mortgages will become more expensive for non-QRM borrowers. He fears that with mortgages becoming more expensive certain hard hit housing markets could take "15 years to recover."
A former MI official himself, he commented "Regulators seem to be detached about how this rule will hurt housing."
The regulatory agencies involved with drafting the rule include the Federal Deposit Insurance Corp., the Comptroller of the Currency, the Federal Reserve, the Federal Housing Finance Agency, the Department of Housing and Urban Development, and the Securities and Exchange Commission.