Consortium of 49 Groups Asks Regulators to Align QM, QRM

by devteam March 5th, 2013 | Share

In a letter sent to the heads of sixrnfederal regulator agencies, a consortium of 49 housing industry participants askedrnthat they align the Qualified Residential Mortgage (QRM) regulation they arernpromulgating with the Qualified Mortgage (QM) rule already released by thernConsumer Financial Protection Bureau (CFPB). rnThe Coalition for Sensible Housing Policy said it sent the request onrnbehalf of “diverse stakeholdersrnunited in their commitment to responsible lendingrnand the recovery ofrnthernhousing market.”</p

The QM, which wasrnissued by CFPB on January 10, sets the standard for fully documented andrnsoundly underwritten mortgage products. rnThe QRM will define exceptions to the Dodd-Frank requirement that loanrnoriginators retain a portion of the loan risk when they sell loans torninvestors.   The letter says, “The riskier features and products</batrnthe heart of the recent financial crisis are not eligible forrnQMrntreatment, and they likewise should not be eligible for the QRM. AligningrnthernQRM and QM standardsrnwill encourage safe andrnfinancially prudent mortgage lending,rnwhile also creating more opportunities for private capital to reestablish itselfrnas part of a robust and competitive mortgage market."</p

Specifically, the Coalition opposes the addition of stringent down payment and otherrnrestrictive requirements to the QRM definition which they say will ultimately limit the abilityrnof private capital to reach lowerrnincomernhouseholds and first-time buyers. The QRM, they maintain, should not be more restrictive than QM.</p

The Coalitionrnstates that the QM definition provides strong underwriting,rndocumentation and product standards that demonstrably lower the risk ofrndefaults consistent with the statutory requirements for the QRM. Synchronizingrnthe QRM definition with the QM would ensure that strongrnincentives for safe and sound lendingrnare in place, while not impairingrnthe return ofrnprivate capitalrntornall segments of thernmortgage finance market.  Also, they say the QM featuresrnarernentirely consistent with the investor protection goals ofrnSection 941 of the Dodd-Frank Act, which limits the QRM exemption from risk retention to loans with “product features that historicalrnloan performance datarnindicate result in a lower risk of default.”</p

The letter was sent to the heads of thernOffice of Comptroller of the Currency, the Federal Deposit InsurancernCorporation, Department of Housing and Urban Affairs, The Federal Reserve, the Securitiesrnand Exchange Commission, and the CFPB.</p

The Coalition’s membership is composedrnof national and state associations representing banking, real estate, title,rnbuilding, consumer, and other interest groups.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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