It was commonly understood that the bureau would issue a final QM rule by the end of summer. The QM rule will establish underwriting standards that lenders can rely on in determining if a borrower has the “ability to repay” a mortgage.
Those underwriting standards must be nailed down before other regulators can craft what’s called a "qualified residential mortgage" rule that will determine which securitized single-family mortgages are exempt from risk retention.
The QM and QRM rules are mandated by the Dodd-Frank Act and must be finalized by Jan. 21.
But consumer and industry groups are divided over a legal threshold that will help shield lenders from litigation risk. Industry groups want the QM rule to provide a “safe harbor” which means borrowers that want to sue must provide proof that their lender did not adhere to the underwriting standards.
But consumer groups want a “rebuttable presumption” legal threshold that will give borrowers more leverage in challenging lenders in court.
Without a safe harbor, lenders are concerned judges will agree to review even meritless lawsuits, costing lenders and investors tens of thousands of dollars to defend or settle.
While there are other difficult QM issues facing CFPB officials, they have come to see the safe harbor issue as “too political,” one source said. So, regulators decided to put off a decision until after the national elections.
CFPB deputy director Raj Date hinted at a QM delay during a speech at the Mortgage Bankers Association’s secondary market conference in early May.
The CFPB wants to craft a “sensible rule,” Date said at the time, a rule that works in all credit cycles. “It’s a complicated issue, but I am fully confident in the bureau’s ability to find a common sense and analytically sound answer. We’re going to take the time to get it right. And, I am confident that we’re going to finalize the ability-to-repay rule before our January deadline.”