Gov’t To Loosen Mortgage Rules; Opposite of “QM”

The WSJ’s top headline today is “U.S. Backs Off on Tight Mortgage Rules.” Here is the link.

This is significant b/c it is a complete reversal of policy, and it portends a definite loosening of lending guidelines. In late 2013, concerns revolved around new “QM” guidelines and a massive tightening of mortgage qualification requirements. None of those concerns came to anything, however.

Since 2013, both the mortgage and housing markets have softened significantly, concerning gov’t officials. As a result, plans are in place to again expand the roles of Fannie and Freddie (as opposed to shrink them), to lessen down payment requirements, to make FHA financing less expensive, and to loosen debt ratio requirements.

The risk of “put-backs” or “loan buy-backs” will also be reduced, making lenders less stringent when it comes to conditions and “overlays.”

This is all good news in the short run b/c it means more loans for more people. In the long run, it means more gov’t involvement in the mortgage markets, and more arbitrary rules, regulations, and uncertainty.