RTC Mortgage Blog

Big Banks Violate Loan Mods/Update on QRM

June 16th, 2011 3:23 PM by Richard T. Cirelli


It’s almost as if the Fed’s are reading my newsletters. I’ve been complaining about what a lousy job the big banks have done regarding the Refinance and Loan Modification programs that the Government has tried to implement. I’ve also complained about the Qualified Residential Mortgage definition that they are trying to create.


Lo and behold, I’m seeing some relief on both issues (and no, I don’t really think they’ve read these newsletters).


I came across this headline in one of my mortgage trade newsletters this morning:

U.S. Halts Mortgage Fees to Three Big Banks

J.P. Morgan, B. of A. and Wells need “substantial’ improvements: Treasury

The Obama administration on Thursday halted payments to three of the largest U.S. banks until they make “substantial” improvements to their performance in mortgage assistance. J.P. Morgan Chase, Bank of America and Wells Fargo can no longer receive fees from the program known as the Making Home Affordable Program, until they make changes to ensure their processes work better, the Treasury Department announced. The program seeks to help troubled borrowers avoid foreclosure.

I’ve said repeatedly, instead of giving these banks a “bonus” for completing a transaction, they should charge them a penalty for not. I think if they had there would have been many more homeowners able to avoid foreclosure. On the other hand, I get a lot of my business from people that originally applied for a loan with these three and had a bad experience.

Update on Qualified Residential Mortgages.

Here’s another headline that I came across this week:

QRM Restricts Credit and Adds Borrowing Costs, Senators Say

Over one-third of the current members of the U.S. Senate have written a letter to federal regulators urging they adopt a less restrictive definition of a Qualified Residential Mortgage than has been formally proposed. , It was signed by 23 Democrats, 13 Republicans, and both independent senators. It urges the regulators to avoid restricting credit to middle class families who are saving to buy a home.

The letter states that the proposed regulations go beyond what was intended in the statute by imposing down payment standards which it termed “unnecessarily tight”.  "These restrictions unduly narrow the QRM definition and would necessarily increase consumer costs and reduce access to affordable credit."  The senators said that well underwritten loans did not cause the mortgage crises and that the additional requirements proposed for QRM swing the pendulum too far and reduce the availability of affordable mortgage capital for otherwise qualified buyers.  Many will have to pay higher rates and fees and others may not be able to obtain a mortgage at all, the letter says.  The senators also criticized "overly narrow debt to income guidelines."

You may recall that the QRM definition was likely to require down payments of at least 20% and maximum Debt-to-Income ratios of only 36% whereas the current guidelines allow as little as 5% down and Debt-to-Income ratios as high as 50%.

The jury is still out as to what the final definition will be but they may not be as strict as feared.


You can always find out what’s influencing Mortgage-Backed Security pricing each day by visiting this page on my website:


Posted in:General
Posted by Richard T. Cirelli on June 16th, 2011 3:23 PM



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