The origination of new mortgages remains at historic lows. But, on the bright side, just about every single one meets "qualified mortgage" requirements proving the borrower's ability-to-repay, according to a report from the Government Accountability Office
New restrictions and increased oversight of mortgage origination come into effect with the opening of the Consumer Financial Protection Bureau
on July 21. This change in regulatory structure is a mandate of Dodd-Frank financial reform.
Under Dodd-Frank financial reform, a mortgage lender is presumed to have satisfied the ability-to-repay requirement and receives some protection from liability when it originates a “qualified mortgage.”
There are nine standards that must be achieved for a QM. And when the GAO looked at data on mortgages originated from 2000 to 2010, it found the vast majority of recent vintage home loans meet these criteria (Click on chart below to expand.):
The report states that mortgage originators are employing conservative standards when writing new loans and sticking with traditional products.
"Mortgages with balloon payments have been associated with repayment problems, likely due to the payment shock that occurs when the loan balance becomes due, or difficulty in refinancing at the end of the loan term, especially if the home value depreciated," the report states.
"Among prime, near-prime, and government-insured mortgages, almost 100% of the originations each year did not have balloon payments," it concludes, in discussing the 2009-2010 period.
The report is skewed in the mid-2000s as there is an abundance of incomplete data. Many of the subprime mortgages, for example, did not require proof of ability-to-repay and therefore information on employment and income may be missing.
Considering this, conclusions from the data are unreliable, the report states
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