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According to Bloomberg, two people familiar with the new rule (who asked to remain anonymous) have said the “line” will be drawn at 43% debt-to-income ratio. This means the borrower’s back-end or total DTI must not exceed 43%, if the home loan is to be considered a Qualified Residential Mortgage.
That number should have a familiar ring to industry professionals. Previous rules have also set the DTI bar at 43%. It seems that federal financial regulators aren’t comfortable with debt-to-income ratios above 43%.
The QRM rule has been a long time coming. It was first proposed early in 2011, but has yet to be finalized or implemented. Earlier proposals included a 20% down-payment requirement and a maximum debt-to-income ratio of 36%. But those proposals drew criticism from a variety of groups, ranging from the National Association of Realtors (NAR) to the Mortgage Bankers Association (MBA), and even a few nonprofit consumer-advocacy groups.
According to a recent Bloomberg report, the current version of the Qualified Residential Mortgage is “softer” than previous proposals. It seems the MBA’s lobbying efforts have paid off. Financial corporations influencing financial regulators. Where have we heard that before?