WASHINGTON — 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.
The group, which included the American Bankers Association, the Mortgage Bankers Association, the National Community Reinvestment Coalition and the Center for NYC Neighborhoods, said a narrow definition that covers only a small proportion of products and small number of borrowers could undermine the housing recovery.
The bureau must finalize a rule, transferred last year from the Federal Reserve, requiring lenders to verify a borrower's ability to repay, unless the borrower has a so-called qualified mortgage.
In a letter to the CFPB dated Monday, the group said a narrowly defined QM could increase risks for lenders and make them less likely to originate non-QM loans, driving up the costs and risks of those products for borrowers.
While they disagree on the kind of protection lenders should receive if they make a qualified mortgage, they said a broad definition using clear, objective standards is essential.
"We believe that is the only way to help the economy and at the same time ensure that the largest number of credit-worthy borrowers are able to access safe, quality loan products for all housing types, as Congress intended in enacting" Dodd Frank, the letter said.
The American Bankers Association issued its own press release urging the bureau to adopt a safe harbor protection from lawsuits for lenders that originate qualified mortgages, adding that a broad definition is unworkable without it.
"The alternative — a rebuttable presumption — lacks any real protections and opens banks up to wide litigation risk," Keating said. "This uncertainty will make borrowing more expensive and credit less available. Some lenders may leave the market altogether."
In a statement Monday afternoon, CFPB Spokeswoman Jennifer Howard said, "The ability to repay rule will have a significant impact on the mortgage market and we want to get it right for consumers. Striking the right balance will depend on a careful analysis of the facts and the data."
"At this point, we are still weighing the options and no decisions have been made," she added.