Testifying at a Senate Banking Committee, Federal Reserve Gov. Daniel Tarullo noted that the QRM risk retention rule is designed to protect MBS investors and the recently finalized QM rule is designed to ensure borrowers are not placed into loans they can’t afford.
As the six regulators sit down to finalize the QRM rule, Tarullo said “making QRM more or less congruent with QM” should be on the table for consideration.
“Given the state of the mortgage market right now, I think we want to be careful here about the incremental rulemaking—that we are not beginning to constrict credit to lower- and middle-class people,” the Fed governor said.
Federal Deposit Insurance Corp. chairman Martin Gruenberg told the committee that the Dodd-Frank Act does not prohibit the QRM rule from being defined as the same as the QM rule.
Comptroller of the Currency Tom Curry agreed with the FDIC chairman on the definition issue. And he agreed with Tarullo that it is “important to look at the cumulative effect” of the rules.
Curry noted that OCC is concerned about “competition and the ability to have the widest number of financial institutions, regardless of size, participating” in the mortgage market.
A recent report by CoreLogic shows that 42% of loans originated in 2010 would not meet the QM test due to the debt-to income limits and other criteria in the QM rule.
If the QRM rule imposes a 10% downpayment requirement, the combined impact of the QM and QRM rules would remove 60% of the loans from the market, according to CoreLogic.