TheMReport — News and strategies for the evolving mortgage marketplace.
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40 | Th e M Rep o RT O r i g i nat i O n S e r v i c i n g a na ly t i c S S e c O n da r y m a r k e t SERVICING The laTesT report: little evidence of 'Significant impact' from Qm The Urban Institute throws in its two cents on QM's effect on lending. B efore implementation of the Consumer Financial Protection Bureau's qualified mortgage (QM) and ability-to-repay (ATR) rules, many industry analysts expressed concerns over the ultimate impact these rules might have on mortgage lending and access to credit. Now that the rules have been in effect several months, the debate has only intensified. In fact, the Federal Reserve's recent Senior Loan Officer Survey, which explored the topic of lending in the post-QM/ATR environment, led to various inter- pretations of the rules' impact on mortgage lending so far. The sur- vey found lending for prime resi- dential mortgages at large banks has not changed much since the new rules went into effect. A new analysis from the Urban Institute, a nonpartisan research group, maintains there has been "surprisingly little im- pact on the origination numbers" as a result of QM and ATR. "While there remains a great deal of uncertainty over the ulti- mate impact of the QM rule, we do not yet see significant changes in the market," the institute stated on its MetroTrends blog. The Urban Institute attributed the rules' minimal impact to the already-tight lending environ- ment prior to rule implementa- tion and to the "patch" that allows the GSEs and Ginnie Mae to continue to abide by their own standards for the next seven years. With agency loans accounting for about 80 percent of today's originations, the ma- jority of loans remain unaffected by the new rules. However, the Urban Institute did acknowledge the poten- tial for further impact as some institutions may have been slow to implement the new rules. Furthermore, the institute lacks data from small banks and credit unions, and these institutions may be reacting differently than larger banks and government agencies, analysts said. According to the institute's data, QM restrictions on interest only (IO) loans, prepayment penalty (PP) loans, and loans with debt-to-income (DTI) ratios higher than 43 percent have thus far had little impact on lending. "Very few IO and essentially no PP loans were made be- fore QM went into effect, and that is still the case," according to the Urban Institute, while the percentage of loans with DTIs exceeding 43 percent "has remained relatively steady." The institute did note a small decline in high-DTI loans at the GSEs, however. Another source of potential impact is the QM stipulation that adjustable-rate mortgages (ARMs) carry the maximum possible in- terest rate for the first five years of the loan. The impact of this stipulation is difficult to measure thus far, as ARM loans began to climb alongside interest rate hikes in the second half of last year. Since January, ARM share has "declined marginally" while remaining higher than early last year during a lower interest rate environment. One segment of the market where the Urban Institute did see a decline in lending since QM implementation is among loans for less than $100,000. However, this decline appears to have started in November and is not overly broad. "[T]here was only a 400-loan decline in the number of new small loans in the bank portfolios between November 2013 and March 2014," according to the institute.