Housing Market, Regulation

NAFCU testifies CFPB’s QM rule may reduce credit availability for qualified homeowners

MortgageDaniel Weickenand, testifying on behalf of the National Association of Federal Credit Unions, told the House Financial Services Committee on Tuesday that the CFPB’s qualified mortgage standard may reduce access to credit.

In order to meet QM standards, a mortgage must not have negative amortization, interest-only or balloon payments, and must have a term of less than 30 years. The borrower’s debt-to-income ratio cannot exceed 43 percent.

Weickenand said a number of mortgage products may disappear from the market because they are non-QM loans, and credit unions may reduce their offerings of non-QM loans that do not meet the CFPB’s criteria.

“Under the rule, the least risk to credit unions would be to originate only QM loans,” Weickenand said. “Limiting loans to solely QMs would reduce the legal risk and help ensure their loans are eligible for sale on the secondary market (as the FHFA has stated it will not allow Fannie Mae and Freddie Mac to buy non-QM loans, with the exception of the debt-to-income ratio component of the QM definition). Additionally, the ability to sell the loans will help credit unions manage interest rate and concentration risks.”

Weickenand pointed to a NAFCU survey that indicated that most credit unions will cut back or completely eliminate non-QM offerings. He said the QM standard will force many credit unions to turn creditworthy borrowers away.

“While credit unions understand the intention of the rule and importance of hindering unscrupulous mortgage lenders from entering the marketplace, this rule is unnecessarily restrictive for credit unions,” Weickenand said.

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