Senator asks Regulators for Consistency between QM and QRM

A senator hasrnasked federal banking regulators to simplify and align underwriting standardsrnfor so-called Qualified Residential Mortgages (QRM) with those for Qualified Mortgagesrn(QM) which were released last week.  In arnletter to the heads of six federal agencies, Senator Bob Corker (R-TN), arnmember of the Senate Banking and Finance Committee, said that failure to synchronizernthe two standards could permanently regulate the private sector out of thernhousing finance business.</p

Under the Dodd-FrankrnWall Street Reform and Consumer Protection Act lenders are required to retain arn5 percent interest in loans they originate for sale; i.e. to keep “skin in therngame.” Loans that are sold to Fannie Mae or Freddie Mac (the GSEs) and thernFederal Housing Administration (FHA) are automatically exempted from the 5%rnretention requirement as are loans that meet the definition of QRM.  That definition is currently being developedrnby six agencies.   The standards defined under the QM definition,rnwhich generally address a lenders obligation to determine the borrower’srnability to repay the loan, were developed and released last week by thernConsumer Financial Protection Bureau (CFPB)… </p

In his letter Corker said, “Regardless of how one may feel about Congressrntelling federal agencies to draft both “qualified mortgage” underwritingrnstandards and rules around so-called “risk retention,” the reality is that thernjoint federal regulators now responsible for the QRM rules are in a position tornmaterially impact what the system of housing finance in the United States willrnlook like for years to come.</p

Forcing lenders to comply with two separate sets of rules isn’t good policy,rnand in this case, it would set back the timetable on doing what we absolutelyrnmust do – begin to move away from a complete dependence on the government forrnmortgage credit in our country.” </p

Corker said that since the rulerncarves out loans sold to the GSEs and FHA, if the QRM rule is writtenrndifferently than the QM rule most lenders will only originate loans intendedrnfor sale to those institutions and to the Veterans Administration.  “As such, a perverse outcome of a QRM rulernthat is different than the QM rule would be that we might permanently enshrinernthe GSEs and other government agencies as the only large-scale source ofrnmortgage credit in our country. With the federal government now standing behindrnover 90 percent of home loans originated in the United States, a situation thatrnis simply not sustainable, such an outcome would not at all be healthy for ourrnfinancial system.</p

Corker told the regulators that matching CFPB’s version of a safe loan forrnany borrower with the regulators’ definition of what constitutes a loan that isrnsafe for securitization makes sense for the system, and would be whollyrnconsistent with the statute.</p

The agencies to whom Corker sent his letter are the Federal DepositrnInsurance Corporation, Department of Housing and Urban Development, Securitiesrnand Exchange Commission, Comptroller of the Currency, the Federal HousingrnFinance Agency, and the Federal Reserve.

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.