Industry Groups React to QM

Many industry groups have commented this morning on the final QualifiedrnMortgage/Ability to Repay rule issued today by the Consumer FinancialrnProtection Bureau (CFPB).  Most of therncomments received so far have been generally favorable and have lauded CFPB andrnthe process they used in arriving at the rule. rnHere is a sampling of the comments we have received. </p

Debra Still, Chairman, MortgagernBankers Association (MBA) said that MBA agrees that the goal of thernregulations, ensuring that borrowers receive loans they can repay, is in everyone’srnbest interests.   Its concern has alwaysrnbeen that this goal be balanced with other housing policy objectives,rnparticularly ensuring the availability of mortgage credit to qualified borrowers.  </p

While she cautioned that MBA neededrntime to carefully examine the new rules, Still applauded CFPB for offering arnlegal safe harbor to lenders when they originate loans under the qualifiedrnmortgage standards.  “This approach should allow lenders to offer sustainablernmortgage credit to a great number of qualified borrowers without having to riskrnunreasonable and overly punitive litigation and penalties.”  </p

However, MBArnremains concerned that certain aspects of the rule could curb competition,rnincrease costs, and tighten credit availability for borrowers.  Still referenced in particular the 3 percentrncap on points and fees as being “overly inclusive as it related to compensationrnand affiliates.  Loans with the samerninterest rate, terms, and out of pocket costs should be treated the same underrnthe rule regardless of the organization structure or business model of thernlender.”  She also pointed to the 150rnbasis point above benchmark threshold for safe harbor provisions, questioningrnwhether it will impact the access of too many borrowers. </p

Fred Becker, President and CEO, NationalrnAssociation of Federal Credit Unions (NAFCU) welcomed the inclusion of a safernharbor for credit union loans that meet the rule’s qualified mortgagernstandard.  “Credit unions have alwaysrnbeen responsible lenders seeking to meet their members’ needs with safe andrnsound products,” he said. “NAFCU strongly believes that the safe harborrnapproach is preferable for all parties involved in a mortgage loan transactionrnas it provides parties clarity and certainty, and consequently discouragesrnfrivolous lawsuits, claims or defenses.”</p

But even with the safe harbor in place, Becker said NAFCU still hasrnconcerns. “It has been our members’ experience that a rigid approach tornregulation is counterproductive, often unworkable and frequently leads tornunwanted results,” Becker said. “As the rule is likely to have greaterrneffect on smaller institutions, NAFCU will continue to pursue avenues andrnsolutions that will limit the rule’s impact on credit unions, including seekingrnan exemption for small, federally insured lenders.”</p

The Center for Responsible Lendingrn(CRL) focused on the consumer protection aspects of the rule saying that itsrnbroad definition of “Qualified Mortgage” means that significant protections affordingrnunder the Dodd-Frank Wall Street Reform Act will extend to families “who in thernpast too often were steered into abusive financial products.” </p

“Ideally, the new rules would havernallowed any borrower with a qualified mortgage to challenge a lender whornfailed to evaluate if the borrower could afford the loan,” the CRLrnpress release said.  However, they dornallow borrowers to hold lenders accountable on the riskiest types of mortgages,rnthose in the subprime market where the problems that led to the housing crisisrnwere concentrated.”</p

The advocacy group said that it willrnclosely monitor the resolution of how yield spread premiums will be countedrnwhen it comes to defining a qualified mortgage. rn”The CFPB should not create a loophole that allows high fee loans torncount as a qualified mortgage.”  If this issuernis appropriately resolved, the rules will be-all in all-good for consumers,rninvestors and the economy, CLR said. Applying these fair, understandablernstandards to the mortgage market will foster a more competitive and robustrnhousing industry.</p

BarryrnRutenberg, Chairman of the National Association of Home Builders (NAHB), saidrnit is essential that the new rule strike the proper balance that encouragesrnlenders to appropriately provide credit to qualified borrowers while assuringrnfinancial institutions they will be protected from lawsuits if they follow thernrule’s criteria.  <br /<br /"Our initial review of the QM rule indicates that this balanced approachrncan be achieved," he stated.  NAHB isrnencouraged that regulators heeded concerns from the housing industry to craft arnbroad standard that includes many of today's sound mortgage products, includingrnfixed-rate and adjustable-rate mortgages, under the QM standard."<br /<br /Noting that the rule does not take effect for a year he said, "It isrnessential that regulators act prudently and thoughtfully in the coming year tornimplement this rule in a sensible manner to avoid disruptions to the housingrnfinance system and ensure qualified borrowers can obtain affordablerncredit."</p

The Independent Community Bankers of America (ICBA) said it was encouragedrnthat the final rule includes accommodations it had advocated for communityrnbanks.   ICBA President and CEO Camden R,rnFine commented, “Excessively rigid rules would threaten to force communityrnbanks out of the mortgage market, making it harder for Main Street consumers tornget a home loan and slowing the nation’s housing recovery. ICBA appreciatesrnCFPB’s recognition of community banks as common-sense, relationship lendersrnthat help their communities thrive.”</p

Provisions structuring the “qualified mortgage” standard as a legal safernharbor and treating certain balloon-payment loans as qualified mortgages willrnhelp Main Street lenders continue providing mortgage credit to meet the needsrnof their customers and communities, he said.</p

The statements generally praised the mannerrnin which CFPB had taken their respective organizations concerns into account inrnformulating the rule.  Still said, “Director Cordray and the staff at the CFPB undertook arndeliberative and inclusive process to create this rule, and we commend theirrnapproach and effort.  Every step of the way, they took the time to listenrnand understand the range of stakeholder concerns with this rule, which may bernthe single most impactful rule that will affect mortgage lending in thisrncountry coming out of the Dodd-Frank law.”  </p

The Coalition for Sensible Housing Policy commented on the matter as well. </p

“Now that federal regulators issued the Qualified Mortgage (QM) rule, it is important they complete the next step, which is to finalize the Qualified Residential Mortgage (QRM) rulemaking. Regulators were correct to reconsider their original QRM proposal, because imposing additional down payment requirements beyond those that have historically been required, such as a 20 or even a 10 percent down payment, would keep millions of credit-worthy borrowers out of the housing market, block private capital from competing throughout all segments of the market, prolong the housing crisis, and maintain the government’s overly large footprint on the housing market. Instead, regulators should preserve a role for prudently underwritten, privately-insured low down payment loans. As a diverse coalition of lenders, real estate professionals, and consumer and civil rights advocates, the Coalition for Sensible Housing Policy calls on regulators to propose a revised QRM definition that tracks the QM in order to ensure that all qualified borrowers have access to affordable and safe mortgage credit.”

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