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A broad coalition of housing advocates and banking industry trade groups called on the Consumer Financial Protection Bureau Monday to broadly define "qualified mortgage" when it issues a final rule this year.
April 16 -
Sometime in June, the long-awaited final qualified mortgage rule will be released. Considerable speculation and debate over variations of the rule have taken place since it appeared in the Dodd-Frank Act. Its ultimate form has implications for access to mortgage credit, its cost, and contingent legal liability, among others.
April 11 -
Deputy CFPB Director Raj Date told an industry group Tuesday that the bureau was carefully weighing the effect that a new ability-to-repay standard will have on the mortgage market.
March 27
A group of 23 banking and real estate trade groups urged the Consumer Financial Protection Bureau on Friday to adopt a safe harbor protection from lawsuits for lenders that originate "qualified mortgages," claiming lenders will tighten credit and exit the mortgage business because of the threat of increased litigation.
The group, which includes Habitat for Humanity, the National Association of Home Builders and the National Association of Realtors, says small lenders will have "great difficulty" managing the potential liability risk and that lenders generally may ultimately decide to get out of the mortgage business entirely because of higher litigation costs.
The CFPB is expected to finalize a rule this year requiring that lenders verify a borrower's ability to repay a loan unless the loan falls under the definition of a "qualified mortgage." The qualified mortgage provision is expected to establish a general set of standards about a borrower's ability to repay their mortgage including debt ratios and employment status.
The American Bankers Association and the Mortgage Bankers Association, which both signed the two-page letter, have been the most vocal proponents of a strict legal safe harbor from liability. In the letter, they say the way the qualified mortgage definition is structured "is the most critical mortgage lending issue facing the CFPB today."
The letter says a "qualified mortgage" should have well-defined standards that specify "the grounds on which there can be litigation or enforcement action as to whether those requirements have been met."
The banking and real estate industries are opposed to consumer groups' efforts to establish what is known as a "rebuttable presumption" protection that would allow borrowers to sue lenders for underwriting mistakes if a loan ultimately goes into foreclosure.
Establishing a rebuttable presumption of compliance, "even with clear substantive standards but lacking clarity or limitations regarding the scope of litigation," would reduce the availability and affordability of mortgages to consumers, the letter says.
"While a consumer is just as entitled to judicial review of an alleged failure to determine ability to repay through litigation involving a safe harbor, any such review would be appropriately focused only on whether the QM's standards or factors have been met," the letter says.
The letter also urges the CFPB to "develop the right standards" to avoid "leaving the matter to the courts."
Frank Keating, president and CEO of the American Bankers Association, said in a separate letter Friday that a safe harbor with well-defined standards "is the only path" to ensure borrowers have access to affordable credit.
