Another development that eventually might lead to higher loan costs is the federal government's definition, proposed in late March, of a qualified residential mortgage, or QRM.
Federal law will allow lenders to buy and sell whole QRMs, but require them to keep a 5 percent ownership interest in any mortgages that don't fit the definition.
As proposed in late March, the definition includes a 20 percent down payment to buy a home, 25 percent equity to refinance an existing mortgage and 30 percent if the refinance has a cash-out component. Loans that feature negative amortization, interest-only payments or onerous rate resets wouldn't be allowed as QRMs.
In the last few years, many homeowners have made down payments of less than 20 percent. The stricter requirements on down payments means borrowers will have to shell out more money at the outset. It's too early to know how the rules will affect interest rates, but it's possible that the rates and fees on non-QRM loans will be higher if those loans are deemed riskier.
FHA loans and loans guaranteed by the Department of Veterans Affairs are exempt from the rule.
The proposal is open to public comment and subject to revision.