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QM-QE=DQ? How the New Reality in the Post-Dodd-Frank Mortgage Market Could Put a Big Freeze on Housing

:: By Steve Cinelli, Founder and CEO, PRIMARQ – Come this January, new elements of the Dodd-Frank Act will take effect with respect to mortgage lending activities. Recall the intent of the Act, a consequence of the financial crisis, was to improve transparency and accountability within the financial system, to protect taxpayers from footing the bill on egregious bailouts of financial services firms, and to protect consumers from abusive financial service practices. In essence, the overarching goal was to bring a semblance of sanity and fairness back to a space overrun with excesses, shortsighted thinking, and fugacious remedies. Unfortunately, the changes on the horizon coupled with President Obama’s chatter about dissolving Fannie Mae and Freddie Mac may be great talking points, yet the outcomes could be harsh. One element of Dodd-Frank is the application of the Qualified Mortgage (QM), which will place new structural and underwriting guidelines on lenders who seek to purely originate loans, which they will ultimately sell to Fannie and Freddie. As long as such guidelines are complied with, lenders can sell loans on a non-recourse basis, i.e., they will not be exposed to any future loan losses. If the loans do not pass the new smell […]

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