If lately you have applied for a mortgage loan, or know someone who has, you’ll be aware that getting a loan has become a lot more challenging than it was in the past. In some respects, that is good, as a big problem that helped bring on the big economic crash of several years ago (and that we still live with today) was lenders making home loans to people who did not have the ability to make their loan payments.
Starting sometime in 2013 getting a home loan will become even more difficult. Stricter lending guidelines called Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) will come into effect. The idea is to set standard guidelines to be followed by lenders and to be met by borrowers in order for the loan to be warranted and/or sold to Fannie Mae and Freddie Mac. In other words almost all lenders will follow the QM and QRM guidelines as they will not want to ‘eat’ the loan in the event the borrower fails to make payment.
In a follow up email I’ll try to explain the issues surrounding QM and QRM, but perhaps the main one for home owners hoping to sell their current home is that borrowers are going to have a harder time getting a loan.
How will this affect the just beginning economic recovery? How will the shadow inventory of ‘foreclosed’ homes the banking industry has not released to the market yet, but eventually will, affect recovery? We’ll find out.