It’s expected that already-reduced credit availability will only continue to dwindle under the impact of Dodd-Frank, according to recent reports from the American Bankers Association. Last year, 9 out of 10 mortgage loans were considered “qualified”. In this same survey, more than 80 percent of respondents also shared that current mortgage lending regulations would impact how much funding is available over the coming year. One out of every five respondents commented that the impact will be severe.
Both qualified mortgage rules and ability-to-repay regulations have influenced the housing market’s attempted recovery, according to the executive president of the American Bankers Association. Despite the fact that other indicators demonstrate it’s a great time to buy a home, lenders are certainly feeling as though these restrictions are affecting what they can offer.
Even with this information in mind, there’s other good news on the horizon. Out of the 182 respondents in the survey, for example, those with assets under the $1 billion mark had the highest number of loans provided to first-time homebuyers. The percentage is the highest it’s ever been in the last 22 years.
One of the most popular reasons for a mortgage to be disqualified from QM standards was high levels of debt to income. The second most common reason had to do with a lack of the mandatory documentation in order to be classified as a qualified mortgage.
Mortgages with 30 year fixed rates are still the most popular throughout the industry, making up about half of all the home loans made in both 2013 and 2014.
Impact on Foreclosure Rates
Foreclosure rates dropped for those banks that participated in the survey. For those respondents, the foreclosure rates from .78 percent to .57 percent across 2013, and the average delinquency rate across single family homes also fell.
Certainly legislators and government regulators are concerned about preventing future housing collapses, which is what spurs these policy changes with new regulation in the first place. While they might mean well, there are always unintended consequences with any piece of legislation, and the Dodd-Frank rules are no exception. When lenders have to comply with new rules of the game, it can significantly alter how they are able to streamline their processes and make mortgages available. Those feeling the squeeze have had to adopt new systems to ensure compliance across the board.
The survey’s respondents indicated their frustration with this, noting that concerns over a rising regulatory burden and great compliance requirements are chief among the issues they expect to battle over the coming years. Nearly 90 percent of survey respondents noted that the regulation has a modern to severe impact on their current business. This data is especially important in light of the fact that June is usually one of the busiest times of the year for buying a home.