Don't 'overcorrect' with mortgage underwriting rules

Perspective: QRM proposal would further harm housing market

An issue of great concern to Realtors is being fought as the National Association of Realtors, along with state and local Realtor associations and some homeowners, is challenging proposed risk-retention rules relating to so-called "qualified residential mortgages" (QRMs).

The QRM proposal is an element of the Dodd-Frank Wall Street Reform and Consumer Protection Act that passed last year.

Dodd-Frank requires financial institutions that securitize mortgage loans to retain at least 5 percent of the credit risk for non-QRM loans, and exempts from the risk-retention requirements those securities backed exclusively by QRMs.

Those loans that are classified as QRMs would require:

1. An 80 percent loan-to-value ratio, which requires a 20 percent down payment.

2. Limiting mortgage payments to 28 percent of gross income and limiting all debt to 36 percent.