8/10/2019 June 2014 QM Mortgage Originators Survey

1/13

2n

Su

M

vey

rigi

nd

NAR

Jun

of

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ese

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20

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8/10/2019 June 2014 QM Mortgage Originators Survey

2/13

ExecutiveSummary

Themortgagemarketwasbuffetedbyanumberofchangesin2013and2014

amongthemhigherfeesattheFHAandchangestounderwritingasrequiredby

theAbility

to

Repay

and

Qualified

Mortgage

Rules.

This

survey

queries

asample

ofmortgagelendersabouttheimpactoftheQMrulethreemonthsafter

implementationinadditiontoquestionsabouttheimpactofchangestotheFHA

program.

HighlightsoftheSurvey

NonQM

lending

accounted

for

1.6%

of

production

by

respondents

in

this

sample

and

8.3%wererebuttablepresumption.

Anencouraging73.7%ofrespondentsindicatedthattheyhadfullyadaptedtothenew

rules,wellaheadofexpectationsreportedbyrespondentsintheJanuarysurvey.

Investorpreferencesareimportant. 68.4%ofrespondentsindicatedthattheydidnot

producenonQMloansbasedoninvestorspreferencesandasurprisinglyhighly50%

indicatedareluctancebyinvestorstopurchaserebuttablepresumptionQMloans.

NonQMlendingwasrestrictedtohighbalanceand/orhighqualitylending.

SinceJanuary10th,nearlyhalfofrespondentsindicatedtheyhadsomeissueclosinga

loandue

to

the

ATR/QM

rule.

Forloansthatdidnotmeetthe3%caponpointsandfees,themostcitedmethodfor

handlingthemwastoreducethefees,butsecondwasnottooriginatetheloan.

Financingfeeswastheleastfrequentresponse.

Roughlyhalfofrespondentsdidnousebuffersaheadofthe3%cap,43%DTI,or

rebuttablepresumptionboundary,and5.3%eliminatedtheminthethreemonthssince

inception. Buybackriskandinabilitytodiscoverallinformationabouttheconsumers

abilitytorepaytheloanwerethemostoftencitedreasonsfortheuseofbuffers.

Thevastmajority,73.7%oforiginatorshaveadaptedtotherules,but22.2%of

respondentsindicated

that

they

would

not

phase

out

buffers

on

QM

safe

harbor

and

rebuttablepresumptionparametersevenoncetheyarefullyadapted.

FHAspremiumincreasesforitsmortgageinsurancesince2010andpermanentMI

policyhaveunderminedanaverageof5.7%potentialpurchaseswheretheconsumer

couldnotaffordFHAsfeesorconventionalfinancing.

Inmostcases,aconsumerfacedwiththehigherfeeschosenottobuyortoputoff

buyingindefinitelyorwereabletoqualifyforVAoraRHSloan. Conventionalfinancing

wascitednearlyhalfasoftenasanoptionandoriginatorsindicatedthatitisdecidedly

8/10/2019 June 2014 QM Mortgage Originators Survey

3/13

8/10/2019 June 2014 QM Mortgage Originators Survey

4/13

TheQu

OnFriday

wentinto

borrower

forvaryin

lenders

amortgage

whichinc

fees,aca

products

NARsfirs

environm

behavior

Respond

presumpt

QMloans

havelimi

1Foramo

mortgage

alifiedMo

,January10t

effect. The

sabilitytor

gdegreesof

it

allows

thapplications

ludesfulldo

pof43%on

thatqualify

tSurveyof

entandthei

oforiginator

ntsindicate

ionmortgag

isinpartdu

edportfolio

reindepthdis

qmrule

rtgageRu

h,2014,ther

oddFranka

paytheirm

assumedco

m

to

minimireceivedon

umentation

hebackend

ndprepaym

ortgageOri

businesspla

intheQM/

anaverage

s. Thevast

totheprep

optionstoho

cussionofthe

leandIts

equirements

ctrequirest

rtgageandi

pliancewith

ze

and

to

buorafterJanu

ofincome,a

debttoinco

ntpenalties

inatorsqueri

ns.Thisseco

TRenviron

riginations

ajorityofm

onderanceo

ldnonQMl

newrulessee

mpact

oftheability

atoriginato

posesstiff

theabilityt

get

for

poteary10th are

setsandem

meratio,an

amongothe

edoriginato

ndsurveyis

entandthe

areof1.6%

ortgageswe

mortgageb

ans.

http://www.

torepayan

rsmakeago

enaltiesift

repayrule,

ntial

penaltieequiredtoc

loyment,a

limitations

requiremen

saboutthei

followupt

impacttoth

ornonQMl

resafeharbo

nksandcre

ealtor.org/art

qualifiedm

dfaitheffor

eydonot. T

whichisadv

s

and

litigatiomplywitht

aximumof

nthetypeo

ts.1

expectation

atshedsligh

purchasem

oansand8.3

rQM. Thel

itunionsin

icles/summar

rtgage(QM

ttoverifya

heQMrule

ntageousto

n

expenses.

eATR/QM

%forpoints

fmortgage

sintheQM/

tontheactu

arket.

%forrebutt

wshareofn

hissample

ofnewquali

rule

llows

All

ule

and

ATR

al

ble

on

ho

fied

8/10/2019 June 2014 QM Mortgage Originators Survey

5/13

Respond

IntheAp

just16.7

Whenas

investors

thesame

willingto

halfofre

ofrebutt

creditris

ntsindicate

ilsurvey,73.

intheJanu

edhowthey

requiremen

assafeharb

producereb

pondentsin

blepresump

andbuyba

havingadap

7%ofrespon

rysurveywi

treatnonQ

ts,but52%d

rQMs,thes

ttablepresu

icatednode

tionloansbe

kriskthesel

tedtothere

dentsindica

hanadditio

,68.4%indi

idnotoffert

ameshareth

mptionloan

mandfromi

tweenorigin

oansposeve

gulationsfas

edbeingad

al44.4%ha

catedthatth

hembasedo

atholdthe

withjust22

nvestorsfor

atorsandin

rsussalabilit

terthananti

ptedtothe

inganticipa

eydonotof

nfirmpolicy.

inportfolio.

.2%havinga

hisproduct.

estorsmight

intheseco

cipatedinth

ewregulati

edbeingco

ernonQMl

Only5.3%t

Originators

firmpolicya

Thisdiffere

speaktothe

darymarket

Januarysur

nsasoppos

pliantbyAp

oansbasedo

reatednon

weremuch

gainstthem,

ceintreatm

differencei

forpooling.

ey.

dto

ril.

n

Ms

ore

but

ent

8/10/2019 June 2014 QM Mortgage Originators Survey

6/13

Finally,o

same.

Respond

thatfitin

initialthr

indicated

mortgage

originate

pointsan

originate

spacedi

thatthey

equalto

ly22.2%ind

ntswereask

oeitherthe

echaracteri

ahigh

degre

sthatweres

mortgagesw

dfeesisam

nonQMmo

inishedasth

weremore

20. Respon

icatedthatt

edtorateth

rebuttablep

sticsdefined

eof

reluctan

lightlyovera

ithbackend

chfirmerbo

tgageswith

eborrower

likelytoori

entsexpress

eytreatedr

eirwillingnes

esumptiono

nonQMloa

eto

originat

QMbounda

DTIsbetwee

undary. The

ifferentcre

creditprofil

inateanon

edmuchles

buttablepr

stooriginat

rnonQMd

sbasedonp

e.The

next

ry. Respond

n43.1%and

nextgroupo

itprofiles.

improved

Mmortgag

reluctancet

sumptionan

mortgages

finitionsin2

roductfeatu

roupof

four

ntsindicate

45%,butno

fcharacteris

otsurprisin

ith10.5%of

toaborro

ooriginated

dsafeharbo

ithdifferen

014ascomp

restowhich

characteristi

anincrease

higherandth

ticsdealtwit

ly,reluctanc

respondents

erwithaFIC

rebuttablep

rQMloanst

characterist

aredto2013

respondents

csdealt

with

dwillingness

e3%capon

hwillingness

tolendint

evenindicat

Ogreaterth

esumptionl

e

ics

. The

to

to

is

ing

nor

ans

8/10/2019 June 2014 QM Mortgage Originators Survey

7/13

8/10/2019 June 2014 QM Mortgage Originators Survey

8/13

18.9%of

citedopti

Whenas

responde

43.8%,in

Somelen

common

aheadof

rebuttabl

Whenas

concern

wasnota

origination.

onat7.6%o

edaboutth

ntsindicated

icatedthat

dershaveop

onthe3%ca

the43%max

epresumpti

edtheirrati

overabilityt

nissueforth

urprisingly,i

thetime.

impactofo

thatthesef

heoutsourc

tedforbuffe

pwith28.6%

imumbacke

nQM.

nal(s)forusi

odiscoverall

issamplean

ncreasingth

tsourcingaf

eswerethe

dfeeswere

saheadoft

ofresponde

ndDTIratio

ngabuffer,

aspectsoft

only16.7%

rateonthe

iliatedservic

sameasinh

higher.

eQMparam

ntsemployin

nd18%fort

4.4%indicat

eborrower

ofthesampl

loantofinan

esliketitlei

ouserates.

eters. Theu

gone. 20%

heboundary

edconcerno

sabilitytore

eindicatedli

cecharges

surance,onl

earlyhalfof

seofbuffers

fresponden

betweensa

verbuybac

payat38.9

tigationcost

astheleast

y12.5%of

respondents

wasmost

tshadabuff

eharborand

riskfollowe

. Noportf

asadriver.

ften

,

r

by

lio

8/10/2019 June 2014 QM Mortgage Originators Survey

9/13

Asdiscus

Onceada

edearlier,n

pted,22.2%i

earlyathird

ntendtomai

fresponden

ntaintheirb

tshadnotad

ffers,while

aptedtothe

only5.6%wi

QMruleby

lleliminatet

prilof2014.

em.

8/10/2019 June 2014 QM Mortgage Originators Survey

10/13

TheFH

TheFHA

purchase

aboutrec

decisions.

Since201

indicated

between

Whenas

higherco

buyingin

through

financing

thecosts

Lending

roleincreas

market. Int

entchanges

0,theFHAh

5.7%oforigi

aresponseo

edhowcons

sts,68.4%of

efinitely. N

AandRHS,

withprivate

while10.5%

Environm

eddramatica

issecondsu

toFHApolicy

sincreased

nationswere

1.1%to2.0

umersimpac

originatorsi

arlyasman

utonly42.1

mortgageins

indicatedtha

nt

llyinrecent

rveyoforigi

andfacetso

heratesitc

lostbecaus

and6.1%t

tedbythein

dicatedthat

originators

citedhavin

urance. Onl

tthey

had

a

earsandthe

ators,respo

ftheprogra

argesformo

oftheincre

7.0%

creaseinmo

theyhadac

oundthatth

gsuccessshi

15.8%ofor

client(s)who

agencynow

dentswere

thatimpac

rtgageinsur

seinFHAfe

rtgageinsur

lient(s)who

eirclient(s)

tingtheircli

iginatorscite

waitedto

sa

supportsal

askedaserie

ttheoriginat

nce. Onave

es. Thedistr

nceratesre

hosenotto

ereableto

nt(s)tocon

dthataclien

vefor

alarge

rgeportion

sofquestion

orsbusiness

rage,respon

ibutionclust

pondedtot

uyortoput

indfunding

entional

t(s)couldab

rdown

pay

fthe

s

dents

red

e

off

sorb

ent.

8/10/2019 June 2014 QM Mortgage Originators Survey

11/13

LocalFH

policycir

borrower

inaccess

mostimp

eitherle

loanlimits

les,buthav

swithprofile

tocredit,but

acted. 88.2

sslikelyor

erelowered

notbeenac

ssimilartoF

borrowers

ofresponde

muchlesslik

inmanymar

tedupon. Su

HAborrower

ithdownpa

ntsindicated

elytoreceiv

ketsinin20

rveyparticip

siflimitsare

mentslesst

thataborro

emortgage

4. Furtherr

antswereas

reduced. Al

han5%orFI

werwithaFI

reditiftheF

eductionsw

kedaboutac

lgroupswou

Oscoresbel

ICOscorefro

HAloanlimit

rediscussed

cesstocredi

ldfaceared

ow680wou

m620to67

swerereduc

in

for

ction

ldbe

was

ed.

8/10/2019 June 2014 QM Mortgage Originators Survey

12/13

Finally,w

makeloa

base,onl

depends

mostwo

withouti

henaskedho

swiththelo

10.5%indic

ontheloan,

uldnotbem

.

wimportant

wdownpay

atedthatitd

butsomew

adewithout

theFHAs10

ent,highD

oesnotimpa

uldnotbe

itand26.3

0%mortgag

I,orlowFIC

cttheirchoi

adewithout

indicatedth

insurancec

Otraitscom

e. Themajo

thefullcov

attheywo

overageisfo

ontotheF

rityof36.8%

erage,21.1%

ldnotorigin

roriginators

Asborrowe

indicatedth

indicatedth

atetheseloa

to

r

tit

t

ns

8/10/2019 June 2014 QM Mortgage Originators Survey

13/13

Appendix

A:

About

the

Survey

InAprilof2014,NARResearchsentoutasurveytoapanelof65differentmortgageoriginatingentities.

ThesurveyinstrumentwassentbyemailonMondaythe8thofAprilandclosedonThursday,May1st.

Questionsinthesurveyinstrumentcoveredthecharacteristicsoftheoriginators,asubsetofquestions

focusedonthequalifiedmortgagerule,andasetofquestionsfocusedontheFHA. Therewere19

unique

responses

to

the

survey

for

a

response

rate

of

29.2%

and

a

margin

of

error

of

11.1%

at

a

95%

levelofconfidence.

Muchlikethefirstsurvey,mortgagebankersdominatedthesample,butthissampleincludeda

modestlyhighershareofcreditunions. Originatorprofileswerealsosimilartothefirstsurveyinterms

ofgeographicdistribution,purchaseshare,averageannualproductionvolume,andthedistributionof

destinations/purchasersoftheoriginatorsproduction.

Questionscan

be

directed

to:

KenFears

SeniorEconomist,

Director,HousingFinanceandRegionalEconomics

TheNationalAssociationofREALTORS

kfears@realtors.org

(202)3831066

KennethR.TrepetaEsq.

Director

Real

Estate

Services

NationalAssociationofREALTORS

500NewJerseyAve,NW

Washington,DC20001

(202)3831294