Friday, June 3, 2011

Dodd-Frank Financial Reform Bill to Create Unrealistic Lending Guidelines

The president of the Mortgage Bankers Association (MBA), Dave Stevens and representatives from the National Housing Conference (NHC) and the Center for Responsible Lending (CRL) have joined forces – along with nearly 40 others – to fight “draconian requirements” proposed for the qualified residential mortgage (QRM) standards. Stevens, Ethan Handelman (NHC) and Ken Edwards (CRL) all claim that the new QRM standards mandated by the Dodd-Frank Financial Reform legislation will make mortgages too expensive and difficult to claim. Ultimately, says the group, not only will fewer people be able to get mortgages, but the rules will create “societal boundaries” that will result, essentially, in blatant discrimination
QRM standards are intended to force banks to keep their own “skin in the game” when making loans. Legislators hope that if banks share more equally in the risks associated with making loans that lenders will be more careful about the loans that they initiate. This would theoretically prevent another sub-prime crisis. A QRM mortgage is one that a lender would not have to hold a piece of but could sell the entire loan because the buyer is highly qualified and considered low risk. One of the major facets of a QRM loan is proposed to be the ability to make a 20 percent down payment. Stevens claims that the new regulations could lead to “long-term rental entrapment” for many Americans that he estimates would need at least ten years to save enough money to make that down payment. Other housing and consumer advocates argue that the issue is a civil rights issue and “falls around people of color,” making it a “class issue” as well.

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