Some want Basel changes for certain non-QM and HLTV loans

Proposed changes to the Basel III mortgage rules could significantly impact how much it costs for lenders to offer specific types of home loans. Currently, regulators are looking at increasing 'risk weightings' for non-QM (non-qualified mortgage) and high loan-to-value (HLTV) loans. For a merchant or operator, this translates to tighter credit availability and potentially higher interest rates for your customers. If lenders have to hold more capital against these loans, they pass those costs down or stop offering the products entirely. The focus is specifically on 'cashflow-dependent' loans, such as those used for investment properties or by borrowers who don't fit the traditional W-2 employee mold. If your business relies on customers who use home equity or secondary property financing to fund major purchases, you should expect a shift in the lending landscape. Lenders like Pennymac are currently lobbying for updates to these rules to prevent a freeze in the secondary mortgage market. While this is primarily a banking regulation, the downstream effect is a reduction in the 'buying power' of the average homeowner. Keep a close eye on your financing partners' approval rates over the coming quarters as these capital requirements are finalized.

Source: American Banker — Top News

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