The new Qualified Mortgage (QM) regulations that went into effect on January 10th tightened mortgage underwriting standards and were broadly expected to compress credit availability – particularly at the lower end and across non-conforming loan categories.
While the prevailing expectation was for some measure of credit tightening, there’s been a general dearth of hard data on the impact.
We received some harder quant today with the release of the Fed’s 3Q Senior Loan Officer Survey (Here) which included a set of special questions on the effects on the approval rates for home-purchase loans of the Ability-to-Repay and Qualified Mortgage Standards under the Truth in Lending Act
Bottom Line: ~30% of banks indicated that ATR/QM rules have reduced approval rates for borrowers across the FICO score spectrum while ~50% reported reduced approval rates across Jumbo and Nontraditional mortgage loans.
In short, the new regulatory provisions are, indeed, dragging on loan approval rates and residential real estate transaction volumes by extension. We expect that drag to continue to impact the reported housing data at least until we annualize the implementation in early 2015.
Joshua Steiner, CFA
Christian B. Drake