The full impact of ATR goes beyond QM compliance asrnbanks must still analyze each loan for ATR compliance, a costly and time consumerrnprocedure.  It is necessary to expectrnthat regulators will want to see documentation of the eight ATR underwritingrnfactors and if they are not sufficient the asset could be downgraded andrnsubject to high capital requirements.  </p

Without “small creditor” status, he said, his loans willrnbe subject to a 43 percent debt-to-income limitation, a lower price trigger forrn”high cost” QM status which carries higher liability risk, and restrictions on balloonrnloans.  ICBA is urging Congress to raise thernloan volume threshold. The problem could be easily addressed by disregarding loansrnsold into the secondary market in applying the threshold,” Hartings said. </p

Daniel Weickenand CEO, Orion Federal Credit Union testifyingrnon behalf of The NationalrnAssociation of Federal Credit Unions said that credit unions have always been somernof the most highly regulated of all financial institutions, facing restrictionsrnon who they can serve and their ability to raise capital and the Federal CreditrnUnion Act has strict consumer protection rules. rnDespite the fact that they were not the cause of the financial crisis, theyrnare still firmly within the regulatory reach of rules promulgated by CFPB. </p

The impact of this growing compliance burden is evidentrnas the number of credit unions continues to decline, he said, dropping by morernthan 900 institutions since 2009.  Onerncause of this decline is the increasing cost and complexity of complying with thernever-increasing onslaught of regulations. rn”We remain concerned about the QM standard and that this rule will potentiallyrnreduce access to credit and hamper the ability of credit unions to continue to meetrntheir member’s needs,” he said. </p

A number of mortgage products sought by credit unionrnmembers and offered by credit unions are non-QM loans and may disappear from thernmarket.  He said a forty-year mortgage loan,rna product sought by credit union members in high costs areas, exceeds the maximumrnloan term for QMs, and because of a problematic definition, a number of credit unionsrnmake mortgage loans with points and fees greater than 3% because they can leveragernrelationships with affiliates to get the best deal for their members. </p

Because a credit union will not receive any presumptionrnof compliance with the ability-to-repay requirements for a non-QM loan, the leastrnrisk to credit unions would be to originate only QM loans.  His own credit union, Weickenand said, hasrndecided to go that route and a recent NAFCU survey revealed that a majority of creditrnunions will cease or greatly reduce their offerings of non-QMs. </p

Weickenand said that NAFCU strongly supports bipartisanrnpieces of legislation in the House (H.R. 1077/ H.R. 3211) to alter the definitionrnof “points and fees” prescribed by the QM standard and an exemption from the QMrncap on points and fees: (1) affiliated title charges, (2) double counting of loanrnofficer compensation, (3) escrow charges for taxes and insurance, (4) lender-paidrncompensation to a correspondent bank, credit union or mortgage brokerage firm, andrn(5) loan level price adjustments which is an upfront fee that the Enterprises chargernto offset loan-specific risk factors such as a borrower’s credit score and the loan-to-valuernratio.</p

Like Hartings, he supports an increase in the exemption’srnasset size and 500 mortgage thresholds. rnHe said many credit unions are approaching one or both thresholds whichrnwill render the small lender exemption moot for them.  </p

The Association also believes that all mortgages heldrnin portfolio should be exempt from the QM rule not just small credit unions andrnwould like to be able to continue to offer mortgages of 40 years or lessrnduration as QMs.  NAFCU also supportsrnCongress directing the CFPB to revise aspects of the ‘ability-to-repay’ rule thatrndictates a consumer have a total debt-to-income (DTI) ratio of 43 percent orrnless which will prevent otherwise healthy borrowers from obtaining mortgage loansrnand will have a particularly serious  impactrnin rural and underserved  areas where consumersrn have  a limited number of options. </p

Bill Emerson, CEO of QuickenrnLoans and Vice Chairman of the Mortgage Bankers Associationrnspoke on behalf of the trade group, starting his testimony by saying, “Irncan tell you categorically that Quicken Loans, like the overwhelming majority</bof lenders, will not lend outside the boundaries of QM. In fact, even if wernwanted to, we wouldn't be able to make non-QM loans because there is no discernablernsecondary market for them. The only place these loans can be kept is on arnbank’s balance sheet.”</p