Mortgage standards are already too tight and the Consumer Financial Protection Agency should not make them even tighter in drafting a final ‘qualified mortgage’ rule, according to a new letter signed by 33 lender, housing and consumer groups.
The QM rule will set the “ability to repay” standards mandated by the Dodd-Frank Act for judging which loans are properly underwritten and shielded from liability. The CFPB is expected to issue a final rule in the third quarter.
“Our organizations believe that an unnecessarily narrow definition of QM that covers only a modest proportion of loan products and underwriting standards and serves only a small portion of borrowers would undermine prospects for a housing recovery and threaten the redevelopment of a sound mortgage market,” the letter says.
The 30-odd groups expect the QM rule will define the boundaries of the mortgage market and few lenders will make non-QM loans.
Groups signing the letter include the American Bankers Association, American Securitization Forum, Financial Services Roundtable, Mortgage Bankers Association, and National Association of Mortgage Brokers, among others.
They don’t want a return of the lax lending standards that fueled the housing boom, but they also don’t want a narrow QM rule that discourages lending to creditworthy low- and moderate-income borrowers and minority families.
“Creating a broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders and investors reasonable protection against undue litigation risk, will help ensure revival of the home lending market,” the April 12 letter says.
