New Definitions For Market Reform?

The Independent Community Bankers of America (ICBA) and HUD have both issued suggestions for reform in both the housing market and the newmortgagerulesdefinition of “qualified mortgage.”

HUD proposed a new definition of “qualified mortgage,” which requires periodic payments, have terms not exceeding 30 years, limiting upfront points and fees to no more than 3% with adjustments to facilitate smaller loans and must be insured or guaranteed by FHA or HUD.

ICBA, on the other hand, recently issued a white paper detailing steps the government should consider in GSE reform that would support small, independent banks and their role in the housing market.

What are the benefits to these suggested reforms?

Ron Haynie, SVP of mortgage finance policy at ICBA says, “Mortgage lending has always been an important service of community banks, which hold nearly 20% of the market and make a disproportionately large share of loans to low – and moderate – income borrowers and larger share of loans for home purchases than other lenders.” Haynie continues to note that community banks want to ensure these common-sense lenders can continue to serve the mortgage-finance needs of customers and communities nationwide for years to come.

Meanwhile, HUD’s newly proposed definition of “qualified mortgage” has a more ultimate effect. The Dodd-Frank Act required HUD to propose a new definition of qualified mortgage that is aligned with the ability-to-repay criteria set out in the Truth-in-Lending Act as well as the department’s historic mission to promote affordable mortgage financing options for qualified lower income borrowers.

According to HUD, the new rules serve to provide credit access to creditworthy, yet underserved borrowers while the ICBA’s recommendations seek to provide a more stable housing market.