Mortgage regulations are having a negative impact on business production and consumer credit availability, according to the American Bankers Association’s Real Estate Lending Survey.
The survey found that 77 percent of banker respondents said that Qualified Mortgage (QM) rules – which impose rules that exceed “ability to repay” standards for borrowers – have reduced credit availability.
Further, about 90 percent of the typical bank’s mortgage loans made last year were qualified mortgages. The average percentage of non-QM loans fell from 16 percent in 2013 to 10 percent in 2017.
It also shows that roughly 28 percent of banks are restricting lending to QM segments only. Also, 52 percent are making non-QM loans only to target markets, despite the fact that these loans meet the ability to repay regulations.
“The survey shows how the current rules are making it difficult for banks to fully serve their communities,” Robert Davis, ABA executive vice president in charge of mortgage markets, said. “The good news is Congress is currently considering legislative changes that would allow a greater portion of creditworthy borrowers’ access to mortgages.”
The most common factors prohibiting mortgage loans from meeting QM standards are higher debt-to-income levels and less complete documentation.
However, there were some positive trends. Banks saw loan production for first time home buyers increase 17 percent in 2017, up from 16 percent in 2016.
“In the face of those regulatory barriers, single-family mortgage loans for first-time homebuyers still accounted for a record 17 percent of all loans in our survey,” Davis said. “That shows how banks are trying to help all creditworthy borrowers share in the American dream. “
Among other findings, foreclosure rates rose slightly from 0.37 percent in 2016 to 0.57 percent in 2017, while delinquency rates fell from 1.42 percent in 2016 to 1.29 percent in 2017.
Finally, bankers cited rising interest rates as a major concern for bankers followed by regulatory burdens, insufficient housing inventory and increased cost of doing business and providing consumer services.