Qualified Mortgage/Ability to Repay Rule: MBA and ICBA Supportive



The Consumer Financial Protection Bureau (CFPB) has formally
released its qualified mortgage (QM) definition and Ability-to-Repay rule, and
financial organizations across the board are responding.

In a recently
released statement, the Independent Community Bankers of America (ICBA) noted
that it is encouraged that the Consumer Financial Protection Bureau’s (CFPB)
final rule on consumers’ ability to repay mortgage loans includes ICBA-advocated
accommodations for community banks.

The organization notes that
provisions structuring the “qualified mortgage” standard as a legal safe harbor
and treating certain balloon-payment loans as qualified mortgages will help Main
Street lenders continue providing mortgage credit to meet the needs of their
customers and communities.

“ICBA and the nation’s community bankers have
been strong advocates for tailored rules that will address the problem actors in
the mortgage industry while not inhibiting community banks’ ability to provide
mortgages to their customers,” ICBA President and CEO Camden R. Fine says.
“Excessively rigid rules would threaten to force community banks out of the
mortgage market, making it harder for Main Street consumers to get a home loan
and slowing the nation’s housing recovery. ICBA appreciates CFPB’s recognition
of community banks as common-sense, relationship lenders that help their
communities thrive.”

The CFPB’s final rule, which takes effect Jan. 10,
2014, implements laws requiring mortgage lenders to consider consumers’ ability
to repay home loans before extending them credit. Included in the rule is a
definition of “qualified mortgage” loans, which are entitled to a presumption
that the creditor making the loan satisfied the ability-to-repay

Several other organizations released statements. Debra W.
Still, CMB, Chairman of the Mortgage Bankers Association (MBA), issued the
following statement on the final Qualified Mortgage/Ability to Repay

“Director Cordray and the staff at the CFPB undertook a
deliberative and inclusive process to create this rule, and we commend their
approach and effort. Every step of the way, they took the time to listen and
understand the range of stakeholder concerns with this rule, which may be the
single most impactful rule that will affect mortgage lending in this country
coming out of the Dodd-Frank law. We look forward to continuing to work with the
CFPB on this and other forthcoming rules.

“MBA agrees that the goal of
this regulation, ensuring that borrowers receive loans that they can repay, is
in everyone’s best interest. We cannot, and should not, go back to the high risk
lending environment of the early 2000s. Our concern has always been that we
balance this goal with other housing policy objectives, particularly the
objective to ensure the availability of mortgage credit to qualified borrowers.
And right now, credit is tighter than at any point we can remember.

rule was just issued, and we must examine it carefully. Nevertheless, we applaud
the Bureau for offering a legal safe harbor to lenders when they originate loans
that meet the rigorous ‘qualified mortgage’ standards in the rule. This approach
should allow lenders to offer sustainable mortgage credit to a great number of
qualified borrowers without having to risk unreasonable and overly punitive
litigation and penalties.

“This is a very complex rule. We remain
concerned that certain aspects of it could curb competition, increase costs and
tighten credit availability for borrowers. In particular, the 3 percent cap on
points and fees appears to be overly inclusive as it relates to compensation and
affiliates. Loans with the same interest rate, terms and out of pocket costs
should be treated the same under the rule regardless of the organizational
structure or business model of the lender.

"Additionally, we will be
looking carefully at whether the interest rate threshold for the safe harbor,
which is set at 150 basis points above the benchmark rate, will adversely impact
too many borrowers. These pricing-related restrictions need to be carefully
examined to ensure that they do not unnecessarily restrict consumer access to
'qualified mortgages,' including smaller balance loans, as well as jumbo loans.

“Ultimately, the final verdict on this rule will be made by the market.
We believe the rule will effectively block the return of risky product features
and inadequate documentation. If it also provides lenders the certainty needed
to originate qualified mortgages broadly across the market to creditworthy
borrowers, it will have been a success. However, if the result is a tightening
of credit as lenders pull back from offering loans that would create greater
risk of litigation, the CFPB may need to quickly revisit the rule to avoid
harming the housing recovery.”

While the National Council of La Raza
(NCLR) indicated the final rule does not reflect all of its recommendations, the
organization, “is pleased that CFPB has crafted a broad and inclusive definition
of a Qualified Mortgage that will ensure Hispanic homebuyers are better
protected from predatory lenders.”

“Greater numbers of Latinos will
become first time homeowners in the years to come helping both the economic
mobility of their families and the prosperity of our nation as a whole,” said
Janet Murguía, President and CEO of NCLR. “We commend CFPB for adopting a broad
definition of a Qualified Mortgage, which will foster an inclusive housing
market for Hispanic families just starting out. The rule will require lenders to
be sure borrowers can afford their loans, a commonsense protection that will
benefit the entire market.”

According to the CFPB, any home loan
purchased by Fannie Mae and Freddie Mac, as well as any mortgages insured by the
Federal Housing Administration, the U.S. Department of Veterans Affairs and the
U.S. Department of Agriculture (USDA) will fall under QM loans. In addition, all
loans issued to borrowers whose debt-to-income ratio doesn’t exceed 43 percent
will also fall into the QM parameters.

NCLR is the largest national
Hispanic civil rights and advocacy organization in the United States.