Federal regulators voted 3-2 this week to implement a new requirement for mortgage lenders. Coming off the heels of CFPB regulations lenders had been wary of a new requirement that all mortgage loans must have at least a 20 percent down payment. If the loan did not have a 20 percent downInvesting in  real estate payment, the lender would be required to retain a 5.00 stake in the loan, regardless if the loan was sold in the secondary for years to come.

For instance, a borrower wanted to put down 10 percent on a $300,000 home. Since the down payment didn’t meet the 20 percent threshold, the lender could still sell the loan but be forced to keep $15,000 of it. Should the loan ever go into default, the original lender that approved the loan would lose its stake. Real estate groups, banks and consumer advocates squawked at this new requirement, saying it would strangle an otherwise struggling real estate scene just now getting back on its feet.

To compromise, regulators will allow an exemption to the 20 percent rule as long as the loan meets existing QM standards. QM stands for qualified mortgage and outlines certain characteristics of a loan allowing a lender protection from lawsuits, buybacks and the 5.00 percent retainer. A few characteristics of a QM loan include loan amortization terms no greater than 30 years, no interest only loans and no balloon notes. Debt to income ratios could not exceed 43 percent of the borrower’s gross monthly income. Today, most every conventional and government loan meets these QM standards. If they do not, lenders can be expected to not only retain 5.00 percent of the loan under certain conditions but have difficulty finding a buyer in the secondary market.