Industry associations ask CFPB to broadly define “qualified mortgage”

Frank Keating

More than 30 different groups issued a letter this week to Consumer Financial Protection Bureau Director Richard Cordray, asking the agency to broadly define a “qualified mortgage” or “QM” under the Ability to Repay regulation.

The CFPB’s pending Ability to Repay regulation was formerly under the jurisdiction of the Federal Reserve Board before the creation of the CFPB under Dodd-Frank. Industry associations have expressed concern that narrowly defining a QM may damage the housing recovery, according to Reverse Mortgage Daily.

“A broadly defined Quality Mortgage rule that includes a safe harbor from meritless lawsuits is essential to preserving credit availability and supporting the housing recovery,” American Bankers Association CEO and President Frank Keating wrote in the letter, Reverse Mortgage Daily reports.

The groups are also concerned that a QM definition that is too narrow may hurt low- and moderate-income borrowers, restricting their ability to attain credit and limiting their options. The groups further said that including a safe harbor is necessary.

“Without a safe harbor, lenders will operate well inside the [QM] boundary to reduce litigation risk,” the groups wrote, according to Reverse Mortgage Daily. “The result will be restricted credit availability. The alternative—a rebuttable presumption—lacks any real protections and opens banks up to wide litigation risk. This uncertainty will make borrowing more expensive and credit less available. Some lenders may leave the market altogether.”

John H.P. Hudson, the Government Affairs Committee chairman of the National Association of Mortgage Bankers, said that the groups’ primary concern is the health of the U.S. economy.

“If the ‘qualified mortgage’ is too narrowly defined with items that really do not measure a consumer’s ability-to-repay, then consumers will simply not have access to credit which will further perpetuate the economic woes this country faces,” Hudson said, Reverse Mortgage Daily reports.

Other groups that signed the letter include the National Association of Realtors, the Appraisal Institute and the Mortgage Bankers Association.

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