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Monday Morning Cup of Coffee: QM watch begins

HousingWire's Monday Morning Cup of Coffee takes a look at news from the weekend, with more coverage on bigger issues.

The mortgage industry and Wall Street are prepping for the qualified mortgage rule, which could be released in its final form by the Consumer Financial Protection Bureau as early as this week. QM, or the ability to repay rule, will determine the lending standards that lenders will have to follow to prevent legal liabilities from attaching to them when extending credit to borrowers.  

Without a safe harbor provision written into the rule and clear lending standards, the banking industry fears excessive pullback in the extension of mortgage credit. 

Rumor has it a more lenient rule is expected as early as this week, but the CFPB has not confirmed the rule's official release date.

The New York Times reported Sunday that the second multi-billion national mortgage settlement – could be announced as early as Monday morning. The report comes on the heels of other publications reporting that members of Congress wanted the $10 billion settlement delayed.

The New York Times claims 14 banks reached a deal with federal regulators, of which $3.75 billion will be dispensed to borrowers who experienced foreclosures in 2009 and 2010.

Seeking Alpha is running a primer on non-agency mortgage real estate investment trusts for investors or education purposes. The article makes the distinction between this type of investment and REITs in the agency space, which are much less exposed to default risk. 

"The mortgages owned by this group generally pay higher interest rates than agency guaranteed mortgages - this also explains why less leverage is employed," the article states.

"Finally, the complex prepayment issues often experienced with agency mortgage REITs are less of a problem here; most home mortgages in the United States can be repaid without a prepayment penalty, the same is not necessarily true of commercial mortgages."

Taylor Morrison Home and TRI Pointe Homes, which filed plans for initial public offerings with the Securities and Exchange Commission last month, would be the first home-builder IPOs since late 2004, according to the Wall Street Journal. Sources say this positive news shows the real estate comeback is real.

Author Chris Dietrich writes, "as the market for initial public offerings comes back to life after a holiday lull, deals from home builders are likely to be among the first out of the gate, with issuers trying to capitalize on an improving U.S. housing market."

If Bill McBride's housing starts projections are anything to go on, real estate will continue to improve, and home builders have nothing to worry about. The author of the Calculated Risk blog expects the next few years to be continually improving for homebuilders, with starts to double in that time.

It all part of a blogpost titled: Question #9 for 2013: How much will Residential Investment increase?

"No one should expect an increase to 2005 levels," he writes, "however demographics and household formation suggest starts will return to close to the 1.5 million per year average from 1959 through 2000."

Credit unions are aggressively pushing for access to the secondary mortgage market. The National Association of Federal Credit Unions released a report saying it would spend 2013 working "to ensure any reform of the government sponsored enterprises, Fannie Mae and Freddie Mac, and the overall housing finance system ensures credit unions have access to an impartial secondary mortgage market."

Credit unions experienced a jump in members in 2012 as more consumers rushed to non-traditional banks for credit.

The Federal Deposit Insurance Corp. did not close any banks during the week ending Jan. 4. 

kpanchuk@housingwire.com 

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