2

nd
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d
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rvey
Origi
and
NARR
Jun
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inato
FHA

Resea
ne201

Mort
ors:
ATre
arch
14
tgag
ends
ge

ExecutiveSummary
Themortgagemarketwasbuffetedbyanumberofchangesin2013and2014
amongthemhigherfeesattheFHAandchangestounderwritingasrequiredby
theAbilitytoRepayandQualifiedMortgageRules.Thissurveyqueriesasample
ofmortgagelendersabouttheimpactoftheQMrulethreemonthsafter
implementationinadditiontoquestionsabouttheimpactofchangestotheFHA
program.

HighlightsoftheSurvey
NonQMlendingaccountedfor1.6%ofproductionbyrespondentsinthissampleand
8.3%wererebuttablepresumption.
Anencouraging73.7%ofrespondentsindicatedthattheyhadfullyadaptedtothenew
rules,wellaheadofexpectationsreportedbyrespondentsintheJanuarysurvey.
Investorpreferencesareimportant.68.4%ofrespondentsindicatedthattheydidnot
producenonQMloansbasedoninvestorspreferencesandasurprisinglyhighly50%
indicatedareluctancebyinvestorstopurchaserebuttablepresumptionQMloans.
NonQMlendingwasrestrictedtohighbalanceand/orhighqualitylending.
SinceJanuary10th,nearlyhalfofrespondentsindicatedtheyhadsomeissueclosinga
loanduetotheATR/QMrule.
Forloansthatdidnotmeetthe3%caponpointsandfees,themostcitedmethodfor
handlingthemwastoreducethefees,butsecondwasnottooriginatetheloan.
Financingfeeswastheleastfrequentresponse.
Roughlyhalfofrespondentsdidnousebuffersaheadofthe3%cap,43%DTI,or
rebuttablepresumptionboundary,and5.3%eliminatedtheminthethreemonthssince
inception.Buybackriskandinabilitytodiscoverallinformationabouttheconsumers
abilitytorepaytheloanwerethemostoftencitedreasonsfortheuseofbuffers.
Thevastmajority,73.7%oforiginatorshaveadaptedtotherules,but22.2%of
respondentsindicatedthattheywouldnotphaseoutbuffersonQMsafeharborand
rebuttablepresumptionparametersevenoncetheyarefullyadapted.
FHAspremiumincreasesforitsmortgageinsurancesince2010andpermanentMI
policyhaveunderminedanaverageof5.7%potentialpurchaseswheretheconsumer
couldnotaffordFHAsfeesorconventionalfinancing.
Inmostcases,aconsumerfacedwiththehigherfeeschosenottobuyortoputoff
buyingindefinitelyorwereabletoqualifyforVAoraRHSloan.Conventionalfinancing
wascitednearlyhalfasoftenasanoptionandoriginatorsindicatedthatitisdecidedly

moredifficulttogetfinancingintheconventionalspaceforaborrowerwithahigher
LTVorlowerFICO.
Finally,roughly10.5%oforiginatorsindicatedthattheFHAs100%mortgageinsurance
guaranteewasnotimportantforlendingtohighLTVorlowFICOborrowers,while
26.3%indicatedthattheywouldnotlendwithoutit.Anadditional57.9%indicatedthat
itwasimportanttodifferentdegreesand5.3%wereuncertain.

TheQua
OnFriday
wentinto
borrower
forvaryin
lendersas
mortgage
whichinc
fees,aca
productst

NARsfirs
environm
behavior

Responde
presumpt
QMloans
havelimit

1
Foramo
mortgage
alifiedMo
y,January10
th
oeffect.TheD
sabilitytore
gdegreesof
sitallowsthe
eapplications
ludesfulldoc
pof43%ont
thatqualifya
stSurveyofM
entandtheir
oforiginators
entsindicated
tionmortgage
sisinpartdue
tedportfolio

reindepthdis
qmrule
ortgageRu
h
,2014,there
DoddFranka
epaytheirmo
assumedcom
emtominimiz
receivedon
cumentationo
thebackend
andprepayme
MortgageOrig
rbusinesspla
sintheQM/A
danaverageo
es.Thevastm
etotheprepo
optionstoho

scussionofthe
leandItsI
equirements
actrequiresth
ortgageandim
mpliancewith
zeandtobud
orafterJanua
ofincome,as
debttoinco
entpenalties
ginatorsqueri
ans.Thisseco
ATRenvironm
originationsh
majorityofm
onderanceof
oldnonQMlo
newrulessee
Impact
oftheability
hatoriginator
mposesstiffp
htheabilityto
dgetforpoten
ary10
th
arer
ssetsandemp
meratio,and
amongother
iedoriginator
ndsurveyisa
mentandthe
hareof1.6%f
mortgageswer
fmortgageba
oans.
ehttp://www.r
ytorepayand
rsmakeagoo
penaltiesifth
orepayrule,
ntialpenaltie
requiredtoco
ployment,am
dlimitationso
rrequiremen
rsabouttheir
afollowupth
impacttothe
fornonQMl
resafeharbo
anksandcred
realtor.org/art
dqualifiedmo
odfaitheffor
heydonot.T
whichisadva
esandlitigatio
omplywithth
maximumof3
onthetypeo
ts.
1

rexpectation
hatshedsligh
epurchasem
oansand8.3
orQM.Thelo
ditunionsint
icles/summary
ortgage(QM)
rttoverifya
TheQMrulea
antageousto
onexpenses.
heATR/QMr
3%forpoints
ofmortgage
sintheQM/A
htontheactu
arket.
%forrebutta
owshareofn
thissamplew

yofnewquali
)rule
allows
All
rule
sand
ATR
ual
able
on
who
fied

Responde
IntheApr
just16.7%
Whenask
investors
thesame
willingto
halfofres
ofrebutta
creditrisk
entsindicated
rilsurvey,73.
%intheJanua
kedhowthey
srequirement
assafeharbo
producerebu
spondentsind
ablepresump
kandbuybac
dhavingadap
7%ofrespon
arysurveywit
treatnonQM
ts,but52%d
orQMs,thes
uttablepresu
dicatednode
ptionloansbe
ckriskthesel
ptedtothere
ndentsindicat
thanaddition
M,68.4%indi
idnotoffert
sameshareth
umptionloans
emandfromi
etweenorigin
oansposeve
egulationsfast
tedbeingada
nal44.4%hav
icatedthatth
hembasedo
hatholdthem
swithjust22
nvestorsfort
natorsandinv
ersussalability
terthanantic
aptedtothen
vinganticipat
heydonotoff
nfirmpolicy.
minportfolio.
.2%havinga
thisproduct.
vestorsmight
yinthesecon
cipatedinthe
newregulatio
tedbeingcom
fernonQMl
.Only5.3%t
.Originators
firmpolicyag
Thisdifferen
tspeaktothe
ndarymarket
eJanuarysurv
onsasoppose
mpliantbyAp
oansbasedo
reatednonQ
weremuchm
gainstthem,
nceintreatm
edifferencein
tforpooling.
vey.
edto
pril.
on
QMs
more
but
ent
n

Finally,on
same.
Responde
thatfitint
initialthre
indicated
mortgage
originate
pointsand
originate
spacedim
thatthey
equalto7
nly22.2%ind
entswereask
toeitherthe
eecharacteris
ahighdegre
esthatweres
mortgagesw
dfeesisamu
nonQMmor
minishedasth
weremore
720.Respond
icatedthatth
kedtoratethe
rebuttablepr
sticsdefined
eofreluctanc
slightlyovera
withbackend
uchfirmerbo
rtgageswithd
heborrowers
likelytoorig
dentsexpress
heytreatedre
eirwillingnes
resumptiono
nonQMloan
cetooriginat
aQMbounda
DTIsbetwee
undary.The
differentcred
screditprofile
ginateanonQ
sedmuchless
ebuttablepre
sstooriginate
ornonQMde
nsbasedonp
te.Thenextg
ry.Responde
n43.1%and
nextgroupo
ditprofiles.N
eimprovedw
QMmortgage
sreluctancet
esumptionan
emortgagesw
efinitionsin2
productfeatu
groupoffour
entsindicated
45%,butnoh
ofcharacterist
Notsurprising
with10.5%of
etoaborrow
tooriginated
ndsafeharbo
withdifferent
014ascompa
restowhich
rcharacteristi
danincrease
higherandth
ticsdealtwit
gly,reluctance
frespondents
werwithaFIC
rebuttablepr
rQMloansth
tcharacterist
aredto2013
respondents
icsdealtwith
edwillingness
he3%capon
hwillingness
etolendinth
sevenindicat
COgreatertha
resumptionlo
he

tics
.The
h
sto
to
his
ting
anor
oans

thannon
reluctance
lessercre
QMrulet
rebuttabl
Nearlyha
10
th
duet
Forloans
achieveco
pointsand
QM,butonly
etowardreb
ditquality,m
thatwouldin
epresumptio
lfofrespond
toarequirem
withpointsa
ompliancewa
dfeesgreate
y5.3%indicat
uttablepresu
mayreflecttig
hibitanexpa
onloans.
ents,47.4%,
entoftheQM
andfeesgreat
astoreducet
rthan3%we
tedtheywere
umptionloans
htcurrentov
nsionofcred
indicatedtha
Mrule.
terthan3%,t
thefeecharg
erenotorigina
emorelikely
s,whichoften
verlaysaround
itinthefutur
attheyhadha
themethodc
gedat41.6%,
atedandouts
ytooriginat
nreflectsthe
dcreditorit
reifinvestors
adsomeissue
citedmostfre
butonavera
sourcingoffe
tetheseprod
edividebetwe
mighthintat
sarereluctan
eclosingaloa
equentlybyre
age21.3%ofa
eeswasused
ucts.The
eenstrongan
tafeatureof
nttopurchase

ansinceJanu

espondentst
applicationsw
foranaverag
nd
the
e
ary
to
with
geof

18.9%ofo
citedopti
Whenask
responde
43.8%,ind
Somelend
common
aheadoft
rebuttabl
Whenask
concern
wasnota
origination.S
onat7.6%of
kedaboutthe
ntsindicated
dicatedthatt
dershaveopt
onthe3%ca
the43%max
epresumptio
kedtheirratio
overabilityto
nissueforth
Surprisingly,i
fthetime.
eimpactofou
thatthesefe
theoutsource
tedforbuffer
pwith28.6%
imumbacke
onQM.
onal(s)forusi
odiscoverall
hissampleand
increasingthe
utsourcingaff
eeswerethe
edfeeswere
rsaheadofth
%ofresponde
ndDTIratioa
ingabuffer,4
aspectsofth
donly16.7%
erateonthe
filiatedservic
sameasinho
higher.
heQMparam
ntsemployin
and18%fort
44.4%indicat
heborrowers
ofthesampl
loantofinan
cesliketitlein
ouserates.N
meters.Theu
gone.20%o
theboundary
tedconcerno
sabilitytore
eindicatedli
ncechargesw
nsurance,onl
Nearlyhalfof
useofbuffers
ofresponden
ybetweensaf
overbuyback
payat38.9%
tigationcosts
wastheleasto

y12.5%of
respondents

wasmost
tshadabuffe
feharborand
kriskfollowed
%.Noportfo
sasadriver.
often
s,
er
d
dby
olio

Asdiscuss
Onceada

sedearlier,ne
pted,22.2%i
earlyathirdo
ntendtomai

ofresponden
intaintheirbu
tshadnotad
uffers,while
daptedtothe
only5.6%wil
eQMrulebyA
lleliminateth

Aprilof2014.
hem.
.

TheFHA

TheFHAs
purchase
aboutrec
decisions.

Since201
indicated
between
Whenask
highercos
buyingind
throughV
financing
thecosts

ALending
sroleincrease
market.Inth
centchangest
.
0,theFHAha
5.7%oforigi
aresponseof
kedhowcons
sts,68.4%of
definitely.Ne
VAandRHS,b
withprivate
while10.5%
Environme
eddramatica
hissecondsu
toFHApolicy
asincreasedt
nationswere
f1.1%to2.0%
umersimpac
originatorsin
earlyasmany
butonly42.1%
mortgageins
indicatedtha
ent
llyinrecenty
rveyoforigin
yandfacetso
theratesitch
elostbecause
%and6.1%to
ctedbythein
ndicatedthat
yoriginatorsf
%citedhavin
surance.Only
attheyhadac
yearsandthe
nators,respon
oftheprogram
hargesformo
eoftheincrea
o7.0%
creaseinmo
theyhadac
foundthatth
gsuccessshif
y15.8%ofor
client(s)who
eagencynow
ndentswere
mthatimpact
ortgageinsura
aseinFHAfe
rtgageinsura
lient(s)whoc
heirclient(s)w
ftingtheirclie
iginatorscite
waitedtosa
wsupportsala
askedaserie
ttheoriginat
ance.Onave
es.Thedistri
anceratesres
chosenottob
wereabletof
ent(s)toconv
dthataclien
veforalarge
argeportiono
esofquestion
orsbusiness
erage,respon
ibutioncluste
spondedtoth
buyortoput
findfunding
ventional
nt(s)couldabs
erdownpaym
ofthe
ns
s
dents
ered
he
off
sorb
ment.

LocalFHA
policycirc
borrower
inaccesst
mostimp
eitherle
Aloanlimitsw
cles,buthave
swithprofile
tocredit,but
acted.88.2%
sslikelyor
werelowered
enotbeenact
essimilartoF
tborrowersw
%ofresponde
muchlesslik
inmanymar
tedupon.Su
HAborrower
withdownpay
entsindicated
elytoreceiv
rketsinin201
urveyparticip
rsiflimitsare
ymentslesst
dthataborro
vemortgagec
14.Furtherre
antswereas
reduced.All
han5%orFIC
owerwithaFI
creditiftheF
eductionswe
kedaboutac
lgroupswou
COscoresbel
ICOscorefro
HAloanlimit

erediscussed
cesstocredit
ldfacearedu
low680wou
m620to679
tswerereduc

in
tfor
uction
ldbe
9was
ced.

Finally,w
makeloan
base,only
depends
mostwo
withoutit

henaskedho
nswiththelo
y10.5%indica
sontheloan,
ouldnotbem
t.
owimportant
owdownpaym
atedthatitd
butsomewo
adewithout

theFHAs10
ment,highDT
oesnotimpa
ouldnotbem
itand26.3%
00%mortgage
TI,orlowFICO
acttheirchoic
madewithout
%indicatedth
einsuranceco
Otraitscomm
ce.Themajo
thefullcove
hattheywou
overageisfo
montotheFH
rityof36.8%
erage,21.1%
uldnotorigin
roriginatorst
HAsborrowe
indicatedtha
indicatedtha
atetheseloa

to
er
atit
at
ns

AppendixA:AbouttheSurvey
InAprilof2014,NARResearchsentoutasurveytoapanelof65differentmortgageoriginatingentities.
ThesurveyinstrumentwassentbyemailonMondaythe8
th
ofAprilandclosedonThursday,May1
st
.
Questionsinthesurveyinstrumentcoveredthecharacteristicsoftheoriginators,asubsetofquestions
focusedonthequalifiedmortgagerule,andasetofquestionsfocusedontheFHA.Therewere19
uniqueresponsestothesurveyforaresponserateof29.2%andamarginoferrorof11.1%ata95%
levelofconfidence.

Muchlikethefirstsurvey,mortgagebankersdominatedthesample,butthissampleincludeda
modestlyhighershareofcreditunions.Originatorprofileswerealsosimilartothefirstsurveyinterms
ofgeographicdistribution,purchaseshare,averageannualproductionvolume,andthedistributionof
destinations/purchasersoftheoriginatorsproduction.

Questionscanbedirectedto:
KenFears
SeniorEconomist,
Director,HousingFinanceandRegionalEconomics
TheNationalAssociationofREALTORS
kfears@realtors.org
(202)3831066

KennethR.TrepetaEsq.
DirectorRealEstateServices
NationalAssociationofREALTORS
500NewJerseyAve,NW
Washington,DC20001
(202)3831294