Realtor Advice

QM, QRM, and ATR . . . Oh My

There has and will continue to be much discussion and hand-wringing about Qualified Mortgages (QM), Qualified Residential Mortgages (QRM),and Ability to Repay (ATR) rules that will go into effect in January, 2014. Why, because lenders making non-QM qualified loans will have to hold reserves against loans sold in the secondary market and lenders violating ATR rules could be subject to lawsuits from borrowers and investors claiming that the lender did not adequately determine if they could actually repay the loan.

The funny thing is that most lenders have already adopted the major provisions of these new rules. Income (and everything else) is verified, documented, and vetted to the nth degree. If you’ve applied for a mortgage lately you know how much scrutiny your buyers receive from lenders today. That said, there are a couple of things going away as a result of the new rules. For example, the maximum loan term for a QM loan will be 30 years, balloon payments will not be allowed (except in very limited circumstances), no negative amortization, and no interest only periods.

We will see how the market reacts to these new rules after January 10, 2014, but in our case we have already adopted virtually all of these provisions. When was the last negative amortization, interest only balloon loan you saw?

Market Comment

Mortgage bond prices finished the week higher which pushed mortgage interest rates sharply lower. Rates improved gradually throughout the week. There was no data the first portion of the week but the Fed MBS purchasing kept things in check. Weekly jobless claims came in @ 339k versus the expected 333k mark which helped rates improve throughout Thursday. Friday’s data also helped rates. Industrial production fell 0.1% versus the expected 0.1% increase. Capacity use came in @ 78.1% versus the expected 78.3% mark. Mortgage interest rates finished the week better by approximately 3/4 of a discount point.


30 Year conforming fixed rates are at 4.375% with 0 points for well qualified borrowers. Rates can vary depending on credit score, down payment, property type and other individual loan characteristics so please use this as a general guideline. Our 15 year fixed conforming rate is 3.50%, again with 0 points.

Jumbo rates continue to outperform conforming rates in this market (ask me why sometime and I’ll try to explain the phenomena). Our 30 year fixed rate Jumbo is currently 4.125% with 0 points – a full .25% BELOW the going confirming rate. The 5/1 ARM is very attractive at 2.75% with 0 points and is attracting a lot of interest from buyers looking for short term financing alternatives.

The weather looks terrific for the back part of the weekend with temperatures at the beach inching back up toward 70 degrees. A perfect Fall weekend to shop for a new home. I’ll e around this weekend if you need anything. Happy selling.

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