Dodd-Frank Look-Backs May Solidify QM Safe Harbor
Editor's Note: This article is part of the National Mortgage News' MBA Annual Special. Click here to see more from the report.
Buried deep in Dodd-Frank is a provision that calls for the Consumer Financial Protection Bureau to assess the effects of the myriad rules it implements every five years. While it hasn't even been three years since the Qualified Mortgage rule was enacted, the agency is already hard at work evaluating the policy and its effects.
But lenders shouldn't necessarily expect the assessment to include changes to the rules, said Kathleen Ryan, counsel at the Washington, D.C., law firm BuckleySandler who served as the deputy assistant director for the Office of Regulations at the CFPB from July 2013 until January 2016.
"There's the assessment and then there's rulemaking," she said, noting that "doing an assessment will take a lot of resources," making it unlikely the agency will propose a new rule through this process.
But that doesn't mean that lenders should rest easy, according to Laurence Platt, a partner at the law firm Mayer Brown.
"Any regulation issued by the CFPB requires tremendous hands-on involvement of the industry to implement," he said. "So any effort to revisit what's finally been implemented that's not the result of specific complaints of the industry is something about which to be concerned."
Many sections of the rule are likely to remain safely intact after their look-backs, particularly the QM "safe harbor" provision. There aren't many industry reports of loans going unmade because the safe harbor isn't broad enough, nor are consumer advocates clamoring that the provision is too broad. So it's likely the CFPB won't "wade in there and change the rules," Ryan said.
Another part of the rule that probably won't go away — and may even get extended — is the temporary provision that grants automatic QM status to all loans eligible for sale or guarantee by the government-sponsored enterprises.
While the provision "is caught up in a large debate about the role the GSEs play…it's going to be hard for the bureau to just let that patch expire," said Benjamin Olson, a partner at BuckleySandler and former deputy assistant director at the CFPB.
One area that could come under reconsideration through the reassessment is how the QM rule ultimately excludes certain borrowers, particularly the self-employed. But Platt said that the industry should be wary of what it wishes for if the CFPB were to amend the rule with these people in mind.
"We'd love to have guidance, but I'd rather have no guidance than bad guidance," he said.