Dodd-Frank Slowing Housing Recovery

Dodd-Frank Slowing Housing Recovery

Dodd-Frank Slowing Housing Recovery

On the first anniversary of a set of regulations meant to prevent another financial crisis, economists are pointing to those very regulations as a key reason for the housing market's struggle to recover. That's according to Anthony Sanders, senior scholar with the Mercatus Center at George Mason University, who says qualifying residential mortgages (QRM) are tightening lending standards and hurting a housing recovery.

"QRM is about restricting lenders from selling loans to willing buyers. The flaw in the logic is that higher risk households are locked out of the housing market, even if the market wants to fund their mortgage," he said.

That logic, Sanders said, was based on the belief that strict lending requirements would eliminate the problem of bad underwriting that may have contributed to the housing market's troubles. "But if the problem was alleged bad underwriting," he said, "There are ways to improve underwriting unrelated to this strict box of mortgage lending."

"As long as investors understand the underwriting guidelines and the risk, QRM should be abolished," Sanders said, adding that the stricter lending requirements' only purpose is to give mortgage lenders and government-sponsored enterprises like Fannie Mae and Freddie Mac an unfair advantage.

"QRM should be abolished or at least relaxed,” said Sanders. “We shouldn’t be letting the federal government determine who gets housing finance and who doesn't."

For more information or to book an interview with the scholars featured in this article, please contact Chad Reese, Assistant Director of Outreach for Financial Policy
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