An extensive group of more than 30 different associations, consumer and civil rights advocates, lenders and others came together this week in a letter to Consumer Financial Protection Bureau chief Richard Cordray imploring the CFPB to broadly define the term “qualified mortgage,” or “QM,” as part of the CFPB’s pending Ability to Repay regulation.
Formerly having had oversight over Ability to Repay, the Federal Reserve Board transferred authority over the rule to the CFPB last year.
Now, industry groups have expressed concern that a QM too narrow could have harmful effects on the housing recovery.
“A broadly defined Qualified Mortgage (QM) rule that includes a safe harbor from meritless lawsuits is essential to preserving credit availability and supporting the housing recovery,” said Frank Keating, president and CEO of the American Bankers Association, one of the groups to sign the letter.
The danger of a narrow rule, the letter states, is potentially ruling out many low- and moderate-income borrowers.
“A narrow rule would limit borrowers’ options, restrict credit availability, and undermine the housing recovery,” it says.
Additionally, inclusion of a safe harbor is essential, the groups say.
“Without a safe harbor, lenders will operate well inside the Qualified Mortgage boundary to reduce litigation risk. The result will be restricted credit availability.The alternative—a rebuttable presumption—lacks any real protections and opens banks up to wide litigation risk. This uncertainty will make borrowing more expensive and credit less available. Some lenders may leave the market altogether.
Those signing the letter include the ABA, Mortgage Bankers Association, National Association of Mortgage Bankers (NAMB), American Securitization Forum, National Association of Realtors and The Appraisal Institute, among others.
“Our primary concern is for the overall health of the national economy,” said John H. P. Hudson, Government Affairs Committee chairman of NAMB. “If the ‘qualified mortgage’ is too narrowly defined with items that really do not measure a consumer’s ability-to-repay, then consumers will simply not have access to credit which will further perpetuate the economic woes this country faces.”
Written by Elizabeth Ecker