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Why QM is the acronym Realtors should now be concerned about

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QRM requires 20% down, what is QM?

This year, most real estate practitioners have learned the acronym QRM which stands for Qualified Residential Mortgage a controversial concept created on The Hill to require a 20% down payment on all future home mortgage loans. Some say requiring that amount down would reasonably put responsible borrowers in homes while others believe it will destroy mortgage loan volumes and housing could come to a screeching halt.

Regarding the QRM NAHB First Vice Chairman Barry Rutenberg said, “Basically the government is telling Mr. and Mrs. America thanks for paying your mortgage during these tough times, and thanks for building your wealth around housing, as we have encouraged you to do, but we are now changing the rules. We are going to reduce the value of your retirement nest egg even more than the recession already has. And as an extra thank you, your kids are going to find homeownership that much more difficult to obtain.”

So what is the QM?

The QRM scare is on many professionals’ minds and there is a great deal of opposition from the real estate industry, all the while the QM (qualified mortgage) proposal is quietly approaching.

The Federal Reserve Board has proposed the QM law that would ensure lenders only lend to borrowers who are able to repay their mortgages under guidelines set by the government and overseen by the new Consumer Financial Protection Bureau.

Why QM is controversial

The controversy with QM is what the final definition of “ability to repay” ends up being. The National Association of Realtors (NAR) has expressed concerned, even writing directly to Ben Bernanke regarding the “rebuttable presumption option that regulators have included for public comment,” Robert Freedman, senior editor of REALTOR® Magazine said. “Regulators are saying they might set a rebuttable presumption standard for consumers who end up losing the ability to repay the mortgage because of unforeseen circumstances, like an illness or job loss. This standard could lead to a lot of lawsuits, lenders believe, so NAR has a concern that lenders would stiffen their standards to such a degree to prevent lawsuits that few people would be able to get loans.”

A more favorable option

The second option (that NAR favors) is a safe harbor which allows lenders to follow a clear set of standards, alleviating the potential onslaught of lawsuits. Although NAR favors this approach, “it wants the standards to be strong enough that it prevents lenders from getting back into the risky loan business again.”

If the standards for QM end up being too strict, lending will become even tighter than it already is and effectively suffocate mortgage applications, but if the standards are too loose, the cycle of bad loans being issued will resurface and we’ll be right back where we started. The video above features Jeff Lischer, managing director of regulatory policy for NAR and outlines a more in depth look at QM.

Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

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10 Comments

10 Comments

  1. Teri Deane

    August 21, 2011 at 1:46 pm

    When a healthy real estate market drives the economy, it's crazy for them to try and clip the wings of buyers who make it all happen. One of the short sales I had listed last year was a situation where the homeowner had put down 20% when she purchased the house, but still ended up not being able to make the payments when she lost her job. I agree that it's better if the buyer has some "skin in the game" with a downpayment, but if 20% becomes the minimum it will drive out a large percentage of worthy buyers which will create an even greater downturn in home values while causing an increase in inventory. Coupled with the foreclosure shadow inventory, expect another crash in the US economy.

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Austin

Austin tops the list of best places to buy a home

When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?

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Looking at the bigger picture

(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).

That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).

They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.

“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”

Click here to continue reading the list of the 12 best places to buy a home…

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Housing News

Average age of houses on the rise, so is it now better or worse to buy new?

With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.

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aging housing inventory

The average home age is higher than ever

(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.

With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.

Prices of new homes on the rise

Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.

Click here to continue reading this story…

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Housing News

Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?

The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.

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zillow move

Why Realtors are vulnerable to these rapid changes

(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.

Note: We’ll let you decide which company plays which role in the image above.

So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.

1. Zillow poaches top talent, Move/NAR sues

It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.

Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.

2. Two major media brands emerge

Last fall, the News Corp. acquisition of Move, Inc. was given the green light by the feds, and this month, Zillow finalized their acquisition of Trulia.

…Click here to continue reading this story…

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