A Little-Noticed Rule and How It Could Redefine Mortgage Finance
Although it seems technical, the question of what’s a qualified mortgage (QM) defines which mortgages make up most of the U.S. market.  This, though, is well known after years of QM squabbles.  What many have forgotten is an even bigger question:  what’s a qualified residential mortgage (QRM).  This term defines which mortgages can be securitized without forcing the originator to hold “skin in the game” – i.e., a portion of the loan on its portfolio.  Given the transformation of U.S. mortgage finance into a business dominated by nonbanks without balance sheets, a problematic QRM would quash a whole lot of mortgage finance no matter the QM.

M061421.pdf