Against the CFPB’s expectations, use of the qualified mortgage patch has not declined since it was introduced in 2013. If it is not replaced before it expires in early 2021, we therefore anticipate significant market disruption, and house prices are likely to see a fall of around 10%. The Treasury plans to replace the patch but one of their options, a spread-based measure of mortgage risk, will act to increase the cyclicality of the housing market, raising the risk of a damaging correction in the future.
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