The Dodd-Frank rules are choking the life out of the mortgage banking industry, a survey of 182 lenders recently conducted by the American Bankers Association (ABA) reveals.
Nearly 80% of respondents say they expect the Consumer Financial Protection Bureau's (CFPB) new mortgage lending rules, which grew out of the Dodd-Frank Act, to further reduce credit availability.
About 19% characterize the impact from the new rules as ‘severe’ while 78% say there is less credit available as a result.
The survey reveals that about 90% of all mortgages originated last year were qualified mortgages, or QMs. That means they were originated under the CFPB's new ability-to-repay (ATR)/QM rules, which require lenders to more-carefully assess each borrower's credit history and income.
‘As expected, the ability-to-repay and QM rules have dampened the housing market recovery,’ says Robert Davis, executive vice president of the ABA, in a statement. ‘Combine that with new mortgage disclosures, which are just around the corner, and we'll continue to see a slow down in what should be the ideal time to buy a home.’
The most likely reason for a mortgage loan not meeting QM standards was high debt-to-income levels followed by lack of required documentation.
Interestingly, lenders reported the highest percentage of loans to first-time homebuyers in the survey's 22-year history.
Meanwhile, the housing market continues to heal from the effects of the Great Recession – in 2014 foreclosures and delinquencies were down significantly. The survey reveals that foreclosure rates fell to an average of 0.57% of all mortgages in 2014 from an average of 0.78% in 2013. In addition, the average delinquency rate for single-family homes fell to 1.76% from 2.16%.
The survey reveals that mortgage bankers are most concerned about compliance and increasing regulatory burden followed by economic uncertainty, the interest rate environment and community bank challenges. About 87% of respondents say regulation is having a moderate to extreme negative impact on their bank's business.
To check out the complete survey results, click here.