Executive Summary

Six months after the implementation of the QM/ATR rule, the market appears to be shifting modestly. This survey serves as both a measure of change in the 2nd quarter and a bellwether for originators’ impressions of market dynamics in light of regulatory changes under the QM/ATR rule as well as changes at the FHA, FHFA, and new credit scoring models. The panel was expanded in the 2nd quarter to include members of Community Mortgage Lenders of America.

Highlights of the Survey

• The non-QM share of originations more than tripled in the 2nd quarter to an originations-weighted 2.6% from 0.8% in the 1st quarter. Rebuttable presumption expanded as well to 12.8% from 9.8% over this same time frame.

• Respondents were less sanguine about their comfort with the QM/ATR rules in the 2nd quarter, with just 61.9% indicating that they had fully adapted compared to 73.7% in the 1st quarter.

• The share of lenders offering rebuttable presumption and non-QM products in the 2nd quarter improved, but willingness to originate non-QM and rebuttable presumption mortgages fell from the 1st quarter to the 2nd quarter. Lenders were more willing to originate prime mortgages, though.

• Over the next 6 months, nearly half of respondents expected improved access to credit for prime borrowers with FICO scores between 620 and 720. However, the vast majority expected no change for rebuttable presumption and non-QM borrowers. Respondents expect improved investor demand for all mortgage types

• Half of respondents indicated that the premium reductions under the FHA’s HAWK program were insufficient or the education fees were too high, while 55% indicated that the program would not expand credit.

• Only 15% of respondents felt that FHA’s program of early reviews would help to alleviate overlays.

• However, 85% of respondents indicated that a reduction of LLPAs directed at high LTV and low FICO borrowers would stimulate access to credit.

• Finally, 60% of respondents indicated that the Fair Isaac Company’s new FICO 9 scoring model would help to stimulate access to credit. Only 35% expected no change as they either defer to their investors’ or the GSEs’ scoring models.

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Appendix A: About the Survey

In August of 2014, NAR Research sent out a survey to a panel of 135 different mortgage originating entities. The panel was expanded in the second quarter from 65 to include members of Community Mortgage Lenders of America. The survey instrument was sent by email on Tuesday the 19th of August and closed on Tuesday, September 2nd. Questions in the survey instrument covered the characteristics of the originators, a subset of questions focused on the qualified mortgage rule, and a set of questions focused on the FHA, FHFA, and the new FICO 9 score. There were 24 unique responses to the survey for a response rate of 17.8% and a margin of error of 6.4% at a 95% level of confidence.

Mortgage bankers dominated this sample, but this sample had more diversity in terms of size of annual originations, a proxy for bank size. Originator profiles were also consistent with prior surveys in terms of geographic distribution, purchase share, average annual production volume, and the distribution of destinations/purchasers of the originator’s production.

Questions can be directed to:

Ken Fears Senior Economist, Director, Housing Finance and Regional Economics The National Association of REALTORS® kfears@realtors.org (202)383-1066

Kenneth R. Trepeta Esq. Director – Real Estate Services National Association of REALTORS® 500 New Jersey Ave, NW Washington, DC 20001 (202) 383-1294