QM is here! What does that stand for? QM stands for Qualified Mortgage. The new Dodd-Frank bill is now taking effect and just six years after the mortgage industry hit hard times the government is here to fix things.
So basically what the new bill is stating is that a mortgage needs to meet particular guidelines such as a borrower’s ability to repay the loan and that they pay no negative amortization. Now…This all seems fine and good, but it begs the question, couldn’t have Fannie Mae, and Freddie Mac (Government owned corporations) adjusted their guidelines to meet this?
Oh, wait, they did, back in 2009 less than a year after the fall out.
As for a borrower’s ability to repay? The month the mortgage industry was collapsing, every major lender immediately abolished their State Income loan programs and everything became full documentation. Negative amortized loan? Gone back in 2008 again. The market corrected itself instantly when the banks started taking losses on these. So why the new QM and the Consumer Financial Protection Bureau to enforce this? Who knows; power control, money? FYI, the CFPB is not accountable to anyone, not Congress, not the President. But, now the government can claim that they spent billions upon billions of tax payer dollars to create a new rule that is six years too late and create an agency that can “protect” the population from bad mortgages.