The Coalition for Sensible Housing Policy
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State Refinance Analysis

For Immediate Release - July 27, 2011

 Federal Proposal Could Raise Refinance Costs for Nearly 25 Million Homeowners

In Top Six Most Affected States, At Least Six in Ten Homeowners Would Face Higher Costs to Refinance

Washington, D.C. – Nearly 25 million homeowners across the country would face more expensive mortgages if a proposal by federal regulators goes unchanged. A proposal released by six federal agencies to implement credit risk retention provisions included in the Dodd–Frank Wall Street Reform and Consumer Protection Act would require homeowners to have at least 25 percent equity in their homes in order to qualify for a lower-rate “Qualified Residential Mortgage” (QRM) for refinancing.  An analysis of the CoreLogic data shows 24.8 million U.S. homeowners – more than half of all U.S. homeowners with a mortgage - have less than 25 percent equity in their homes.

Homeowners looking to refinance but fail to qualify for a QRM will be subject to additional costs associated with lenders’ risk retention requirements included in the Dodd-Frank bill.  According to the National Association of REALTORS®, consumers in a non-QRM loan could pay between 0.80 and 1.85 percentage points more in interest rate, simply because they could not meet the down payment or equity requirements.

“In short, the proposed rule moves creditworthy, responsible homeowners into the higher cost non-QRM market,” stated an executive summary of the analysis by the Coalition for Sensible Housing Policy, a group of more than 40 consumer organizations, civil rights groups, lenders, real estate professionals and insurers, in a recent White Paper on the proposed QRM rule.

The proposed QRM definition is part of the risk retention regulations required by the Dodd-Frank Act, which Congress enacted last year. The risk retention provisions require the issuers of mortgage-backed securities to retain a portion of the risk of potential loss on those assets. Recognizing that risk retention would impose increased costs even on creditworthy borrowers, Congress sought to incentivize more responsible borrowing and lending by exempting some mortgages – QRMs – from risk retention requirements if they met thorough underwriting standards.

The proposed QRM rule ignores compelling data that demonstrate sound underwriting and product features, like documentation of income and type of mortgage, have a larger impact on reducing default rates than high down payment and equity requirements. 

The Coalition for Sensible Housing Policy believes that QRM should be redesigned to encourage sound lending behaviors that reduce future defaults without harming responsible borrowers and lenders.  For more information, visit www.sensiblehousingpolicy.org.


State-by-State Analysis of Homeowners Facing Increased Refinancing Costs as a Result of Federal Regulators' QRM Proposal

 

Proportion of Homeowners with Less Than 25% Equity

      Rank        

Total Number of Homeowners with Less Than 25% Equity

     Rank         

National

52%

 

24,764,345

 

Alabama

47%

30

160,265

29

Alaska

44%

35

40,772

42

Arizona

72%

2

950,544

7

Arkansas

51%

18

122,865

34

California

54%

10

3,672,304

1

Colorado

58%

7

658,631

13

Connecticut

37%

42

302,016

23

Delaware

42%

37

76,801

40

District of Columbia

41%

40

40,312

43

Florida

66%

3

2,933,728

2

Georgia

65%

4

1,052,676

6

Hawaii

30%

48

68,641

41

Idaho

54%

10

131,855

33

Illinois

52%

15

1,143,133

5

Indiana

49%

24

297,820

24

Iowa

45%

34

156,948

30

Kansas

48%

26

143,558

31

Kentucky

48%

26

136,392

32

Louisiana

47%

30

99,565

37

Maine

35%

44

23,776

45

Maryland

50%

20

671,179

12

Massachusetts

37%

42

559,371

16

Michigan

64%

5

884,899

8

Minnesota

46%

33

261,346

27

Mississippi

62%

6

23,637

46

Missouri

52%

15

406,267

20

Montana

35%

44

40,069

44

Nebraska

51%

18

113,320

35

Nevada

83%

1

482,068

19

New Hampshire

50%

20

106,059

36

New Jersey

41%

40

765,318

10

New Mexico

42%

37

97,503

38

New York

26%

49

484,856

18

North Carolina

53%

13

806,720

9

North Dakota

34%

46

16,864

47

Ohio

56%

8

1,234,990

4

Oklahoma

50%

20

204,386

28

Oregon

49%

24

341,292

21

Pennsylvania

34%

46

618,355

15

Rhode Island

42%

37

95,190

39

South Carolina

54%

10

324,627

22

South Dakota

N/A

N/A

N/A

N/A

Tennessee

53%

13

518,102

17

Texas

48%

26

1,583,288

3

Utah

55%

9

262,340

26

Vermont

N/A

N/A

N/A

N/A

Virginia

52%

15

652,071

14

Washington

48%

26

679,213

11

West Virginia

43%

36

4,681

49

Wisconsin

47%

30

297,400

25

Wyoming

50%

20

16,332

48

 

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