As the qualified mortgage (QM) and qualified residential mortgage (QRM) future rules are discussed by rulemaking officials, housing advocates and Wall Street investors, the rental markets in the United States continue their healthy growth. Real estate analysts such as Christopher Matthews of Time magazine believe that strict QM and QRM rules may end up placing greater restrictions on mortgage lending, which will only make rental markets even more profitable.
Housing advocates and major mortgage investment firms are pushing for some existing lending restrictions to be relaxed when QM and QRM rules are finalized. The banks and consumer advocates are equally concerned that strict mortgage lending and underwriting guidelines may leave too many people out of the housing market. They also worry that income inequality will also grow to greater levels.
Supporters of relaxed lending guidelines often cite wealth building as an important aspect of homeownership. This assumption is contingent upon acquiring real estate as an investment and timing the market. Christopher Matthews cites the work of respected economist Robert Shiller in this regard; he points out that residential real estate has been proven to be a marginal long-term investment.
To profit in the housing market, home shoppers need to assume certain risks and apply certain investment savvy. When mortgage lending rules are relaxed down to subprime levels, legions of less-than-savvy borrowers are bound to get burned in the process. Lowering debt-to-income (DTI) and increasing loan-to-value (LTV) ratios may lead to a second housing bubble; keeping these ratios as they currently are may limit the number of potential borrowers and homeowners, and that may actually be a positive situation for the ongoing economic recovery.
Those who support keeping the current mortgage lending guidelines strict and pushing lenders to keep greater levels of risk in their own books do not necessarily dismiss homeownership as one of the tenets of the American Dream. Their argument is that income inequality cannot be solved with relaxed mortgage lending guidelines. The U.S. becoming a renter nation is not an attractive notion, but it is arguably better than a nation of subprime borrowers who cannot make monthly payments.