The CFPB is currently drafting regulations that define the requirements of a Qualified Mortgage (“QM”) and the benefits to lenders whose loans fall within the QM parameters. Recognizing that “[t]here can be little or no access to credit unless suppliers of capital are willing to finance home mortgages,” Patricia McCoy, the CFPB’s assistant director for mortgage markets, is appreciative of the hundreds of extremely thoughtful comment letters received that will inform this “critical and difficult rulemaking.”
While the QMproposed rule was originally drafted by the Federal Reserve Board (“FRB”), the rulemaking authority was transferred to the Bureau under the Dodd-Frank Act on July 22. Pursuant to section 1412 of the Act, a lender may presume that a residential mortgage loan satisfies the Act’s “ability to repay” requirement if the loan is a QM and meets the Act’s and the Bureau’s standards for such a loan. By satisfying the QM standards, a lender can take advantage of a “safe harbor” as to the ability-torepay requirement. Balancing the QM underwriting and loan term requirements with lender protection so that lenders will be willing to make the loans while consumers are protected is the regulatory quandary facing the Bureau. Lenders fear that without a true safe harbor, they may not be able to sell the loans on the secondary market.
Complicating matters further is the rulemaking by six federal agencies (SEC, HUD, OCC, FRB, FDIC, FHFA) regarding the standards for a Qualified Residential Mortgage (“QRM”), which mortgage will be exempt from the 5% risk-retention obligation imposed on financial institutions that securitize mortgage loans (Dodd-Frank Act, section 941). By exempting QRMs, the cost of securitizing such mortgages is reduced, providing an incentive for greater origination of these more responsible mortgages. While the CFPB is not involved in the QRM rulemaking, the industry is hoping that the QM and QRMdefinitions are coordinated so that QMs are not subject to risk retention and that such loans can be sold on the secondary market.
The Bureau’s Mortgage Market Group will be teaming with the Bureau’s Regulation Group in drafting the new QM rule. The CFPB is hoping to produce a final QM rule early next year.