Expiration of a Qualified Mortgage Rule May Hurt Housing Prices
- Ending ‘GSE Patch’ would reduce mortgage credit, home demand
- High-DTI mortgages accounted for 30% of GSE production in 2018
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Home prices may come under downward pressure should the Consumer Financial Protection Bureau allow the “GSE Patch” for Fannie Mae and Freddie Mac to expire in January 2021.
Home loans are granted a “qualified mortgage” (QM) designation should they meet certain criteria, one of which is that the debt-to-income (DTI) ratio of the borrower must be no higher than 43%. This QM designation for a loan is vital as it gives lenders protection from ability to repay litigation.