Before the speculation starts, I must say that the more I read about this, the less dramatic it seems. Title of the L.A. Times article (as usual for that rag) is much more sensational than what the agreement appears to entail.
Here’s the actual WSJ article that everyone is rehashing and using as their basis of speculation, BTW. Apart from a 3% downpayment requirement for some loans (which existed anyway until 2013) and a clarification of rules vis-a-vis fraud, it doesn’t actually seem all that dramatic or quick to be implemented:
The new agreement would clarify which mistakes should constitute fraud, giving greater confidence to lenders that they won’t be penalized many years after a loan is made. Still, lenders and regulators must reach an accord on what to do if they disagree on some problems, which could involve using a third-party arbiter to resolve disputes.
Betting that lying about income or failing to verify will still constitute fraud.
Lastly, the 3% downpayment is the minimum downpayment possible, and won’t apply to a lot of loans. If the loan hits debt-to-income thresholds under QM/ability-to-repay, the bank will have to keep a part of the loan on its books and won’t be able to fully resell it to the GSEs unless the loan is made for less money. Requiring either a lower sale price or more money down. So ultimately, QM will control downpayments more than the minimum % requirement itself.
I try to buy a house at 3% down, but the loan payment is 60% of my income, verified over past two years, and I have credit card payments totalling another 10%. Lender will tell me to either put more down, negotiate price down, or go walk off a pier. And rightly so.
If and when someone tries to fuck around with QM or Dodd-Frank, THEN I will worry about a new bubble.
