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QM: Shutting the Door on Homeownership?

Robert Ottone
Jul 16, 2013

“The QM, lack of availability and lack of downpayment is going to continue to drive the rental market, which is a shame, because renters often can’t qualify to buy homes,” said John Hudson, former Government Affairs Committee Chair with the NAMB—The Association of Mortgage Professionals. “A lack of affordable housing is something I see happening in the near-future. This is a huge problem, debt-to-own ratios are pretty ridiculous.” Rentals are up, according to a recent blog post over at Dr. Housing Bubble. Regardless of what potential changes are made to the QM rule, the blog post parrots Hudson in that there’s a genuine concern over whether renters will ever be able to afford a home based on the potential for clarification of QM ruling and potential revision. Back in February, Mortgage Bankers Association (MBA) CEO David H. Stevens told Housing Wire that “the rule is likely to harm consumers with low balance loans by either increasing their rates or depriving them of needed credit.” When the housing bubble burst, around 2007 or so, rentals began to spike across the nation. While homeownership rates aren’t as bad as they were in 1995, rates are clearly on the decline, with many homes in negative equity (underwater). The rate, including underwater homes, for rental over ownership is around 65 percent, against the rising trend of people losing their leveraged properties who are now re-entering the home ownership market. Multi-unit housing permits are also on the rise, with some homeowners simply converting their homes into rental properties in order to draw additional income. The demand for rentals is at a tremendous high, considering the cost of homes has been on the rise over the past few years, as well. Of rising concern is the student-debt bubble. With so many young people entering the job market stuck with high student loan rates, the potential to own a home right out of college seems like a complete impossibility. Bloomberg Businessweek kicked around a few ideas to eliminate student-debt by tying income to debt repayment, providing loans based solely on course of study, provide financial aid to colleges as opposed to students themselves and rethink Pell Grants, by forcing certain colleges who can’t match Pell Grant money to no longer be eligible for student loans. “The next generation of homebuyers are saddled with student loans, how are they going to meet downpayments?” Hudson asked. Whether increasing homeownership through the elimination of tremendous student debt or through dramatic QM rule reform, the nation is facing a rising tide of rentals that simply doesn’t allow for renters to save up enough money to enter the purchasing market. While housing prices rise and housing becomes more readily available, renters are simple unable to place downpayments on homes. 
Jul 16, 2013
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