REPORT: lending rules would have cut the defauls in half

evince

Truthmatters
http://blogs.wsj.com/developments/2...could-have-cut-defaults-in-half/?mod=msn_free




Nearly half of all mortgage defaults from the housing bust might have been prevented by forthcoming consumer-protection regulations, but another 25% of loans that didn’t default might not have been made, according to an analysis by economists at Goldman Sachs GS -3.58%.

The Goldman analysis tries to quantify the impact of the forthcoming “qualified mortgage” regulations, which were part of the 2010 Dodd-Frank financial-regulatory overhaul. The law changed lending rules so that mortgage lenders are legally responsible for ensuring a borrower can repay a loan. The Consumer Financial Protection Bureau was tasked with writing rules for a “qualified mortgage” that lenders could make that would automatically satisfy the new ability-to-repay mandate.

The “QM” rules don’t take effect until next month. Lenders aren’t barred from making loans that fall outside of the QM rules, though they could face greater legal liability on those loans. Tuesday’s WSJ looked at how some banks have decided that they will offer some “non-QM” loans once the rules take effect next year, primarily by making loans to affluent customers (or potential customers) that will stay on banks’ balance sheets.

The Goldman study assumes that any loan that wasn’t a QM wouldn’t have been made. Nontraditional loan products are excluded from the QM definition, meaning loans with interest-only terms, for example, which don’t require immediate principal payments, wouldn’t qualify.

For loans originated between 2005 and 2008, nearly 47% of loans that defaulted had at least one product feature that isn’t allowed under the QM rule; around 59% of loans made in 2007 that ultimately defaulted had at least one nontraditional product feature that doesn’t meet the QM standard. (And because many of those defaults led to foreclosures that sparked the broader housing meltdown, those defaults may have indirectly produced even more defaults of traditional mortgages.)

But the study shows that around 25% of mortgages made between 2005 and 2008 that didn’t default might also have been excluded from the market, including 30% of loans made in 2007.

Loans with those nontraditional product features were concentrated in the “sand states”—Arizona, California, Florida and Nevada—that had some of the bubbliest housing markets. More than nine in 10 interest only loans in 2006 were in those states, along with nearly seven in 10 so-called “option” adjustable-rate mortgages, which require low minimum payments before resetting to sharply higher levels.

Many of those products have largely disappeared from the lending environment since 2008 and aren’t expected to come back anytime soon. So what changes could consumers see as a result of the regulations?

In addition to restricting QM to fully amortizing mortgages, lenders must show that borrowers’ total debt payments don’t exceed 43% of their pretax income. (Loans that are eligible for purchase by Fannie Mae FNMA -7.35% and Freddie Mac FMCC -7.45% can have higher debt-to-income ratios for now.)

The debt-to-income cap could curtail lending for borrowers seeking “jumbo” mortgages that are too large for government backing and who have irregular incomes or harder-to-document incomes.

“Self-employment income is harder to underwrite than is wage income, and lenders may become incrementally less willing to make loans to such borrowers given new legal obligations,” said the Goldman report. Borrowers that make a significant share of their earnings from volatile sources of income, such as bonuses, tips, commissions, and investment income, could also face greater difficulty
 
there are people in his world that want the people to NEVER understand what was done to them


they want to be able to do it again at some point


they will bury this information in any way they can



the inernets ( that series of tubes) makes it impossible for them now
 
gee I didn't ban anyone from this thread


its just that when the facts hit your faces you shrink away
 
are you aware the banks did things like reposess people who were not in default?

If something is repossessed, it's because it is in default. The two go together. Someone's how isn't repossessed by the bank when they make payments.
 
you are an insane gun nut creatin


who cares what you say nutbag

I'm what you would call a gun nut because I exercise my 2nd Amendment rights to own them and plenty of them. What's funny is there isn't a damn thing you will or can do about it.
 
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