Refinance soon to avoid stricter rule

By Marcie Geffner -

Homeowners who need to refinance an existing mortgage, but don't have substantial equity, might want to act soon to avoid a new rule that could make refinancing more expensive. However, the rule governing "qualified residential mortgages" is still in flux and won't be in effect until at least a year from now.

At issue is the so-called credit risk retention rule, which is part of the federal Dodd-Frank Act. The rule "requires lenders that securitize mortgages to retain 5 percent of the credit risk, unless the mortgage is a qualified residential mortgage or otherwise exempt," according to the National Association of Realtors.

Six federal agencies have proposed a joint definition of the qualified residential mortgages, or "QRMs." These loans are expected to be less costly for borrowers because the loans won't be subject to the risk retention requirement.

Read on: Refinance soon to avoid stricter rule