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The QM Rule Is Essential for Consumers

NOV 9, 2012 11:42am ET
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After years of irresponsible, reckless lending–which resulted in trillions of dollars in lost wealth and millions of foreclosures–Congress finally acted to prevent lenders from selling consumers unsustainable home loans.

It enacted Dodd-Frank and included the category of qualified mortgages to encourage banks and lenders to do the right thing for consumers and themselves by offering safe, affordable and sustainable mortgage products.

Recently, many in the financial services industry have pushed for a weak QM rule, and have even pushed for rolling back Dodd-Frank altogether. Those who are outspoken about weakening regulation seem to have short memories. Only a strong QM rule can prevent a repeat of the past and protect consumers from the type of risky and irresponsible lending that preceded the foreclosure crisis.

At the National Community Reinvestment Coalition, we believe that having strong underwriting requirements and loan parameters in the QM rule is critical to making the mortgage industry safe again for both consumers and lenders. The Consumer Financial Protection Bureau must issue a strong, thoughtful rule that contains robust consumer protections. Such a rule can also clearly provide the bright lines and clarity that the industry asks for while ensuring equal access to sustainable mortgages for America's working families.

The truth is that strong underwriting is in everyone's best interest. Therefore, there's no real reason for anyone to disagree with requiring lenders to factor in and verify factors such as a prospective borrower's credit history, employment status and monthly debt-to-income ratio. Each of these requirements is a reasonable and rational consideration and gives substance to the ability-to-repay assessment in Dodd-Frank.  

It's equally important that the definition of a qualified mortgage is not too narrow in terms of what it encompasses, so as not to restrict access to credit. But make no mistake: NCRC supports a QM rule with strong consumer protections and vigorous underwriting requirements to prevent lenders from steering our economy into another mess.

It is also critical that there is a rebuttable presumption for qualified mortgages. Claims that industry litigation expenses associated with a rebuttable presumption will prevent lending are simply false. Commonsense and past experience dictates that we must preserve borrowers' legal rights to protect themselves from any new problematic industry practices that could emerge. The larger burden of proof must be on lenders and not borrowers.

There is a lot of confusion on this matter. At times, this confusion has been deliberately sowed to obscure the importance of Dodd-Frank reforms and the crucial protections they provide for the American public. But the American people have not forgotten that lenders played a central role in the economic crisis, and broad distrust of banks and lenders rightfully persists. 

That the financial services industry, still in the wake of the crisis it birthed, has so quickly made a push to roll back and weaken regulations is truly both shameful and shameless. Our collective focus should be ensuring the return of a safe, sound and strong mortgage market.

Dodd-Frank is, in fact, the best hope for the lending industry because it tells investors from around the world that a broken system has been repaired and it is now safe to reinvest in America.

Comments (2)
I am all for responsible lending, but let's be honest when we state that the tightening has gone way too far in the wrong direction and until lenders hire underwriters who actually know how to think, we are in for a mess. I have been in this industry 25 years and the quality of processors and underwriters is horrible at best, and they are the only ones making a sustainable wage.

The slowness in the process puts more and more dutie on the loan originator, who more often than not, does not get a dime until at least 6 weeks after the loan closes.

Perhaps the consumer protection bureau can do something to help out the originator, to make sure that they get paid for the amount of hour that they actually put in on a file.
Posted by | Saturday, November 10 2012 at 10:01PM ET
When is someone going to address of the unfair policy of the mortgage rule.
as to I had a bankruptcy chapter 7 which discharge my home do to high out of pocket meds, It took the bank two years to foreclosure on the home . Its two years to wait on the bankruptcy which will be up this coming March , But I have to wait until the two year from the foreclosure date . I am a vet and have my Va certification for Va loan
It is not right to hold me or anyone else to the foreclosure rules when it is the bank and courts time line to do so which takes too long I feel the bankruptcy should be the only rule or only one year from the foreclosure date . All this was a bank cause problem . Everyone else is being help but , Vets and home owners who have have to do what I have had to do.
What can we do . who do we call text or what . My credit score is avg. 700. We need help out here. A lot of other home owners are being help. Talk to mortgage lenders an they feel the same way. Its like a double penalty , the Va would give me a loan today with a fair reason an put in the file but the mortgage lenders are the problem. I have new credit and savings . this needs to be address. I know ther are plenty people in this same mess.
Thanks
Vincent Manna
Posted by | Friday, December 07 2012 at 2:00PM ET
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