ABA Raises Concerns Over Qualified Residential Mortgage Definition

NewImage.jpgAs the financial industry waits for rules from regulators on risk retention for mortgage loans as required by the Dodd Frank Act, the American Bankers Association said imposing imposing too broad a requirement is likely to cause lenders to leave the marketplace, reduce the amount of credit available to eligible borrowers, and harm the fragile economic recovery.

The ABA supports a broad safe harbor, known as the Qualified Residential Mortgage or QRM, which would not be subject to risk retention requirements.  The letter, sent to the heads of the eight regulatory agencies involved in writing the new rule, said regulators need to consider other legislative and regulatory efforts already undertaken when implementing risk retention requirements.

“Using every new regulatory tool in isolation to correct every problem identified during the crisis will result in an over-regulated market that is unable to address the nation’s credit needs,” said Frank Keating, the new president and chief executive officer.  “It is imperative that the QRM exclusion provide a safe harbor for properly underwritten loans with a low risk of default – this includes the majority of loans being made by depository institutions today.”


Reverse mortgage lenders should be fine when it comes to the QRM since Dodd-Frank explicitly excluded loans with FHA and VA guarantees from risk retention requirements, but until the rule is written there is no sure thing.  The ABA would also like the QRM to include loans that are sold to Fannie Mae and Freddie Mac.

“We believe that defining the QRM exclusion narrowly to severely restrict loans from purchase by GSEs and therefore reduce their activities is an inappropriate use of the QRM exclusion,” Keating said. “GSE policy must be considered separately from the improved underwriting goals of risk retention.”

For a copy of the letter, see here.

Join the Conversation (3)

see all

This is a professional community. Please use discretion when posting a comment.

  • Here is one place I do not agree with Admin. This provision hurts the future growth of our industry. If all we ever want to be is FHA product bound, then Admin is absolutely 100% right. But is that the best solution for the industry?

    If our industry is going to grow, we need a strong proprietary reverse mortgage presence. Dodd-Frank does not create the right environment for that to happen.

    Even though the picture for substantial increases in home values is very very bleak for 2011, that does not mean we should not be looking at brighter days ahead. Where we are currently is in a pit compared to where we can be in the next few years.

    It is time we start thinking outside the proverbial box.

  • I concur with the Critic. We need to grow and in order for us to grow we have to be innovative and have alternatives. Our hope was to see 2011 be the year we became creative again.

    Good proprietary products are not only good for the originators but healthy for the secondary market and a great benefit for the senior.

    The implementation of the Financial Regulatory Reform bill and the Consumer Protection Bureau seems to have drastically reduced the chances of the proprietary products coming to fruition in the way they need to be. The demand for reverse mortgages is growing but outside forces continue to hamper us to meet those needed demands.

    Our politicians must surely realize the senior population needs to use the equity in their homes to help them survive in this day of age. Instead our politicians and their committees look for every way to chop up the reverse mortgage. They want to keep reducing the percentage of the value a senior can get, complicate the counseling, over regulate the program and make it so hard on the good originators, they are leaving the business. Not to mention bringing the media down on the program.

    Every day that goes by I see and hear things that amaze me. We seem to have lost all the God given common sense that has been bestowed upon us. We are in a great industry that does so much good for our proud seniors. We must fight to retain the program and do what ever we can to lift up its reputation to the level it was five years ago.

    Thank you,

    John A. Smaldone

    • John,

      While mortgage reform was needed, it became an excuse to create Dodd-Frank without providing real reform. Today Fannie Mae and Freddie Mac are still buying questionable loans. The forces that pushed improper lending and underwriting standards for the sake of wider homeownership are actively pushing their agenda and creating an environment where we could quickly have another housing crisis quietly building while we are still trying to wade out of the mess we are currently in.

      While there is help in Dodd-Frank, it also brings a controlled environment that might lead to a golden era of government controls but will also create permanent financial market value declines of unprecedented magnitude. Its goal seems to be, “why not keep kicking a good man while he is down.” It is one of those “gifts” that if it stays unamended will just keep giving.

      While I like a whole lot that Representative Frank has to say, the bill is far more Dodd than Frank. I sincerely wish the best for former Senator Dodd in his retirement from government and hope never to see his active participation in our government again.

string(111) "https://reversemortgagedaily.com/2011/01/13/aba-raises-concerns-over-qualified-residential-mortgage-definition/"

Share your opinion