The recovery in the housing market continues with the latest data from Corelogic showing home prices rose in November 7.4% year-over-year, a noticeable acceleration from October’s growth of 6.3% year-over-year. Corelogic's advance reading on December shows prices rising 7.9% year-over-year. Their distressed-excluded home price index is estimated to have risen by 8.4% in December.
An important note: the Consumer Financial Protection Bureau (CFPB) recently laid out its definition of a qualified mortgage (QM). Lenders and financial institutions alike were worried about a QM being too restrictive. It appears that nearly everyone is pleased with the final definition laid out, which includes restrictions involving a borrower’s “ability to repay”, income and assets, and debt-to-income ratio. It also protects borrowers from predatory loans and exotic mortgages.
One important note, highlighted by Hedgeye Financials Sector Head Josh Steiner is as follows: “Any loan that isn’t considered a QM now becomes a subprime loan, and many banks will be unwilling to lend to non-qualified borrowers.”
"Ultimately, the CFPB’s new rules strike the right balance between responsible lending and mortgage availability but should have little impact on the current housing market. Potential borrowers that were unable to get loans in the past should still be unable," said Steiner.