It turns out that all of the concern and trepidation surrounding the rollout of Consumer Financial Protection Bureau’s new Qualified Mortgage and Ability-to-Repay rules in January wasn’t worth it.
Prior to the new lending standards going into effect, many in the industry worried that mortgage originations would drop sharply due to the new CFPB standards.
But according to new analysis from the Housing Finance Policy Center team at the Urban Institute, there has been “surprisingly little impact” on the mortgage origination numbers since QM went into effect in January.
In a new report authored by Jim Parrott, Ellen Seidman, Laurie Goodman and Bing Bai, the team from the Urban Institute writes that they have seen “almost no impact in the government-sponsored enterprises (Fannie Mae and Freddie Mac) or government agency (Ginnie Mae) market.”
The authors add that there has also been “minimal” impact on the loans that banks are holding in portfolio.
“And, since the GSEs and Ginnie Mae together account for approximately 80% of all originations, the muted impact on their loans far outweighs the slightly stronger impact we found in bank portfolios,” the report states.
According to the report, there are four elements of the QM rule that could have a significant impact on mortgage availability:
“Mitigating the impact of these factors is the part of the QM rule known as ‘the patch,’” the report states. “This allows the GSEs and government agencies such as the Federal Housing Administration to operate under their own standards for seven years or, in the case of the GSEs, when they exit conservatorship, whichever is sooner.”
The report states that the GSEs and the have FHA eliminated the DTI restriction but retained the other requirements.
According to the authors’ research, each of those factors has had limited impact on access to credit.
The report states that the amount of IO and PP loans were very small before QM went into effect, and “that is still the case.”
The report also states that the amount of loans that exceed a DTI ratio of 43% has not decreased either.
The share of loans with DTIs over 43%, while different in each channel, has remained relatively steady at approximately 10% in bank portfolios, 17% for the GSEs and 35% for Ginnie Mae,” the report states.
"However, in recent months, the GSE share of higher DTI loans has declined slightly. This is worth keeping an eye on, as the expectation has been that the patch will encourage continued lending to lower-income borrowers through the GSEs as well as through FHA.”
So why has the impact of the QM rule been so limited? The reports posits four reasons:
The authors suggest that the true impact of QM may not be seen until the fall of 2015, when the 2014 Home Mortgage Disclosure Act data is released because that data will contain the mortgage application, origination and denial rates for almost all lenders.