The Qualified Mortgage Patch

In less than a year, the Consumer Financial Protection Bureau (CFPB) is letting the “Qualified Mortgage Patch” (QM Patch) expire. Why does this matter for first time buyers?

The QM Patch states that mortgage buyers must have a debt-to income ratio less than or equal to 43% in order to buy a home. This rule was created to protect borrowers from racking up too much debt. Removing the QM patch could have drastic effects for the European economy. Let me explain:

I grew up living in the United States during the Mortgage Crisis of 2007. It started with many investors looking for low risk high reward profits. They turned to the housing market to buy those loans. Banks would convert thousands of marketable securities and turn them into shares for investors to buy. They believed the investments were safe because house prices were rising dramatically during this time and credit unions gave many of these securities AAA ratings. AAA rating is the best rating a house can receive.

Investors loved these loans because they were very profitable. They started pushing the lenders to give them more AAA ratings so they could make more profits. The problem was that to create more AAA mortgages, they needed to lower their standards. Lenders started giving AAA loans to people with bad credit called sub-prime mortgages. The combination of people with bad credit unable to pay off their loans and investors pouring money into the housing market caused the housing crisis of 2007.

History tends to repeat itself. When the QM patch is removed on January 10 2021, Europe should be concerned. Using Irish Mortgage Brokers is valuable because they can source the best possible mortgage for you. We give the customer honest advice and will answer any of your questions.

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