Housing risk rising as more loans don’t meet QM on DTI

Source: AEI International Center on Housing Risk, www.HousingRisk.org. Separate index not available for VA guaranteed loans.. Fannie/Freddie index somewhat above 1990 level and rising.. Nearly one in four loans don’t meet DTI limit in QM -and likely won’t going

Or, with a hat tip to Anthony Sanders, distinguished professor of finance at George Mason University and a member of the Fannie Mae affordable housing council, if you look at the lending standards now.

The Federal Housing Administration (FHA) is the prime source of this risk. In February, virtually all of the home purchase loans it guaranteed had a down payment of less than 5 percent, and one.

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Installment loan delinquency rates dropped nearly 11% from 3.49% in Q3 2014 to 3.11% in Q3 2015.. TransUnion’s. Foreclosures down for 20th straight month housing risk rising as more loans don’t meet QM on DTI The former has to do with underwriting standards, while the latter has more to do with risk retention. Think of the qualified.

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The Qualified Mortgage Rule is part of the regulation mandated by the Dodd-Frank Act of 2010. It states that the borrower must pass an ability-to-repay analysis for their loan to be considered a "Qualified Mortgage," or "QM" loan. Loans that don’t meet QM standards open up lenders to lawsuits from borrowers and penalties from regulators.

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The share of QM loans with DTI ratios over 43 percent has risen because the widening gap between house price appreciation and wage growth has forced homebuyers to borrow more in comparison with incomes. And since 2016, rising interest rates have increased monthly payments, further increasing DTI

Ben Wu is executive director of LoanScorecard, a leading provider of non-agency automated underwriting, CECL loan-loss reserve solutions and borrower point-of-sale solutions designed to meet today’s regulatory challenges and capitalize on market opportunities.

Do the loans have to be sold/guaranteed by the GSE such as FNMA and HUD/GNMA or do we just have to have GSE underwriting standards in place? The issue is, for a QM the DTI must be no more than 43%, and if loans not sold to FNMA are not GSEs, then they may not be QMs if the DTI is greater than 43%. Same thing for FHA loans not sold to GNMA.