Mandated under the 2010 Dodd-Frank Act, the new “qualified mortgage” standards that designate which loans are available to a majority of consumers, are intended to protect American consumers from the same risky loans that contributed to the 2008 housing and financial crisis. Real-estate agents and mortgage lenders are concerned that the new rules will disrupt the housing recovery and reduce the number of home loans available, according to the Wall Street Journal.
Thirty-three groups, including the American Bankers Association, the National Association of Realtors and the Mortgage Bankers Association, are prepared to send a letter to the CFPB on Monday warning against an overly narrow definition of “qualified mortgage” lending rules.
“An unnecessarily narrow definition…that covers only a modest proportion of loan products and underwriting standards and serves only a small proportion of borrowers would undermine prospects for a housing recovery and threaten the redevelopment of a sound mortgage market,” the organizations wrote, the Wall Street Journal reports.
In developing of the rule, lawmakers are attempting to curb the issuance of loans that come with low rates and other unique features that make it difficult for consumers to repay the loan, a contributing factor of the housing crisis.
Jen Howard, a CFPB spokeswoman, said that the rule is still under open consideration and that “we want to get it right for consumers,” according to the Wall Street Journal, adding that “[s]triking the right balance will depend on a careful analysis of the facts and the data.”
Lenders are concerned that the rule will not provide a safeguard against lawsuits pertaining to loans that meet CFPB guidelines. Consumer advocates have pushed for the continued ability of borrowers to file lawsuits.
Regulators are currently struggling to complete another set of standards mandated under Dodd-Frank that would exempt high-quality mortgages from new mortgage-backed securities requirements. The proposal has been slow-moving due to similar criticism that the provision would hinder the housing recovery, the Wall Street Journal reports.