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Opinion, commentary and analysis on everything that makes the U.S. housing economy tick -- not to mention the ghosts in the machine, too. Written by HW's team of editors and reporters each business day.
Lending

Monday Morning Cup of Coffee: The launch of QM is not the horror story many imagine

December 30, 2013
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Monday Morning Cup of Coffee takes a look at stories across the HousingWire news desk, with more coverage to come on bigger issues.

As the housing market enters 2014, at least one report says the market can breath a sigh of relief. The takeway from the article: despite new regulations, borrowers will do just fine.  Although the Consumer Financial Protection Bureau's Qualified Mortgage definition and ability-to-repay rule go into effect on Jan. 10, a Bloomberg article claims the new guidelines will not kick borrowers out of the market since the market has already adjusted to tight lending standards.

The borrowers who do get locked out should probably take it as a sign that they are not financially ready for a mortgage, the article pointed out.

Lenders have already tightened their lending standards since the financial crisis, so next year will only make official what is currently in practice.

Instead, the bigger concern is what lies ahead for the nation's economy? According to the article, "under the new mortgage rules, the people who are most likely to get rejected for a loan are ones who live in states where housing prices are very high or where the bounce-back from the crash has been weakest."

Meanwhile, another significant rule continues to challenge U.S. bank regulators. The Volcker rule was finally approved in early December after years of deliberation, but banks are already fighting to change certain provisions, Reuters noted in an article.

"The so-called Volcker rule prohibits banks from owning hedge funds or private equity funds to reduce risk, but the ban included a type of security that a group of community banks regard as harmless," the article said. As a result, regulators said they would consider allowing banks to continue to hold certain complex securities.

Banks pushed for a new ruling by the end of the year since accounting rules would force them to write down $600 million in capital this quarter, but officials said a ruling by Jan. 15 would be sufficient.

The American Bankers Association filed the case in addition to several other companies.

While all these rules were created to protect borrowers and the country from another financial crisis, one protection measure is proving to be less effective than planned.

According to an article in the Washington Post, mortgage-assistance initiatives fail to produce the desired outcomes in many cases.

While assistance can be helpful, there are other factors to consider. The article notes that assistance cannot necessarily overcome big financial shocks such as death, disability or job loss. 

A study conducted by the Federal Reserve Bank of Richmond found that 59% of homeowners who received assistance at a mortgage-assistance event failed to become current on their mortgage payments.

The study also found that servicers are more likely to help borrowers who are already in a financial position to succeed.

Residents of San Francisco could benefit from more housing relief next year. Right now, the city's Mayor Ed Lee is trying to increase affordability for the middle class.

Lee is moving housing affordability for the middle class to the top of his priority list for next year.

But the real question is how much can actually be done?

"It's just not something that we have historically paid attention to," Lee said in the San Francisco Chronicle article. "We thought middle-income people would take care of themselves."

The city is falling behind on plans to build 12,000 homes, with the construction pace taking longer than expected, the article said.

 In the meantime, Lee will attempt to build on unused city, community college and public utility land that is scattered around the city.

The Federal Deposit Insurance Corp. reported no bank closings for the week ending Dec. 27.

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