On a quarter-over-quarter basis, the share of home loans originated that weren’t Qualified Mortgages nearly doubled. Meanwhile, a big portion of lenders are still nervous about meeting QM requirements.
Sixty-four percent of lenders had issues closing loans during the third quarter as a result of some facet of the QM rule. But the share eased from exactly two-thirds in the second quarter.
The biggest issue hurting the market in the third quarter was credit overlays. After that was documentation, then debt-to-income ratios.
The findings were discussed in the Fourth Survey of Mortgage Originators 2014: RHS, Consumer Constraints, and Rate Expectations from the National Association of Realtors.
The survey was conducted in October and sent to 135 mortgage originating entities. Twenty-five unique responses were received.
“Respondents’ confidence in their preparations for the QM/ATR rules eroded again in the third quarter, with just 58.3 percent indicating that they had fully adapted compared to 61.9 percent in the second quarter,” the report stated.
During the third quarter, 5.0 percent of loan originations were non-QM loans. The share nearly doubled compared to the 2.6 percent in the second quarter.
But the share of closed loans designated as rebuttable presumption QMs dropped to 3.5 percent of production from 12.8 percent in the prior three-month period. Still, the share of originators offering rebuttable presumption inched up to 84.0 percent from 83.3 percent.
Safe harbor QMs represented the bulk of third-quarter originations: 91.5 percent. The share jumped from 84.6 percent three months earlier.
Nearly a fourth of lenders indicated that investor takeout for non-QM loans had improved from the second quarter.
“Willingness to originate non-QM mortgages fell dramatically from the 2nd quarter, but the decline was less dramatic for rebuttable presumption mortgages,” the report stated. “Lenders were more willing to originate prime mortgages with the exception of those with lower FICOs.”
The Rural Housing Service increased the fee it charges program users to 0.5 percent from 0.4 percent. More than 58 percent of survey respondents said the increase will have a moderate impact on RHS lending in their area, while more than 8 percent said the impact would be significant. No impact was expected by nearly 17 percent.
Repurchase demands significantly impacted 42 percent of lenders’ decision to lend, and another 4 percent indicated a moderate impact.
