Qualified Residential Mortgage, known as QRM, is a new type of low-risk mortgage with anticipated lower interest rates. Sounds benign enough, right? But, let’s look a little closer… it’s the details that make the difference and, fortunately, QRM is finally arousing the fear and respect it deserves. So, how do you really define QRM and what’s it for?
The Dodd–Frank Wall Street Reform and Consumer Protection Act signed into law about a year ago required lenders to retain a portion of the risk of the loans they sell to investors, unless the loan was deemed “safe.” These exempt loans are known as QRMs; the task of officially defining QRM was left to the wisdom of federal regulators. While the specific details are not yet defined, once they are, QRMs will be the most desirable loans for lenders to make to homebuyers since they will be more profitable and easier on the lenders’ back offices. At issue are the attributes that qualify a QRM, including credit score, debt-to-income ratio, and the granddaddy of show-stoppers, the size of the down payment. (Our thoughts about down payment size) The current down payment proposal for QRMs would provide incentives for lenders to require a minimum down payment of 20 percent. keep reading