A report says proposed rules for qualified residential mortgages may benefit the housing market over the long term, though in the meantime they may actually further harm the industry.
Standard & Poor's analyzed the effects of newly proposed risk retention rules and their component, a 20 percent down payment requirement on QRMs. That hefty down payment, along with tighter standards on debt-to-income ratios and credit histories, will mean fewer consumers will be able to qualify when they apply for a home loan, said the report. In a few years, however, credit performance for home loans could actually see improvement, the report added.
"Fewer borrowers will meet these underwriting standards, which will reduce demand for housing and depress home prices even further," said Erkan Erturk, an S&P analyst. "On the other hand, the proposed underwriting standards will likely improve the future credit performance of underlying mortgage loans and ultimately create a more stable housing market."
The rules have been met with harsh criticism from market analysts and housing advocates, and legislators have said they might be swayed to push for a lower down payment requirement, such as 10 percent.
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