QRM Guidelines Come Under Fire From FHA

By Kyle Chezum Updated on 4/15/2011

Qualified residential mortgage guidelines have come under fire in recent weeks, drawing attention from top economists and speakers across the nation.  Acting Federal Housing Administration Commissioner Bob Ryan has made a statement to regulators that seems to sum up the majority of the criticism that has been levied against these new lending standards.

In short, Ryan made the case that requiring higher down payment amounts across the board won't necessarily reduce the risk that homebuyers will default.  An equal number of creditworthy and non-creditworthy buyers may be prevented from purchasing homes under the new guidelines, and because long term creditworthiness is not tied directly to higher down payment amounts, little good may in fact be accomplished.

Instead, the new QRM rules may simply create an illusion of safety while preventing many borrowers from purchasing homes, stifling the housing market further.  “This [QRM] definition has the potential to create false- positive situations,” Ryan said in a statement to regulators and policymakers.

The standards were originally developed to prevent mortgage originators from writing bad loans simply to sell them to investors.  But at present, the standards may be "too strict," and may simply cut off housing from a large number of truly qualified buyers.