Genworth calls for addition to QRM definition

Genworth Financial recently filed a letter to the six financial regulatory agencies responsible for defining QRM in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, stating mortgage loans with down payments as low as 5 percent should be included in the definition. Genworth said with proper underwriting and mortgage insurance, these loans do not expose borrowers or investors to undue risk.

Genworth said the current definition of QRM forces all low payment lending to the Federal Housing Administration, putting taxpayers at risk. In addition, the proposed 20 and 10 percent down payment options under the current bill will result in higher costs and reduced availability of mortgages for credit worthy families.

Genworth believes its proposed definition will increase the number of borrowers who have access to a QRM, result in loans that perform 54 percent better than those purchased by the government sponsored enterprises and 77 percent better than conventional mortgage loans.

The October 1, 2011 deadline for the Dodd-Frank legislation will also drop the loan limit on jumbo loans. The maximum loan limit will drop from $729,750 to $625,500. In addition, Mercury News reported median home prices have dropped considerably throughout the nation, and these prices affect the formula to determine the loan limit for a borrower.

"It's a ridiculously huge drop, and a ridiculous equation they are using to formulate this," said Stuart Shankle, broker at Shankle Real Estate in Monterey, California. "It's going to leave a tremendous void in the market." 

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