Narrow QM Would Harm Consumers and the Housing Recovery
WASHINGTON, D.C. – April 17, 2012 – (RealEstateRama) — A diverse group of 33 lenders, housing professionals, consumer advocates and civil rights organizations came together today to call on the CFPB to issue broadly defined and clear Qualified Mortgage (QM) standards as part of the forthcoming Ability to Repay regulation.
The organizations wrote to Richard Cordray, Director of the Consumer Financial Protection Bureau, that a narrowly defined QM would undermine prospects for a housing recovery and threaten the redevelopment of a sound mortgage market.
“Congress intended that all creditworthy borrowers – especially low- and moderate-income borrowers and families of color – should be extended the important protections of a QM … A broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders reasonable protection against undue litigation risk, will help ensure revival of the home lending market.”
Federal Reserve Chairman Ben Bernanke, other regulators and many private sector economists and housing market analysts have highlighted the fact that today’s underwriting standards are too restrictive and are holding back a housing recovery. A narrowly constructed definition of Qualified Mortgages would further tighten credit, and harm consumers, curtail lending and jeopardize the fragile housing recovery.
– Consumers – Many of today’s loans and borrowers would be forced into the non-QM market, which will be far costlier, burdening families least able to bear the expense. Furthermore, these higher-priced loans would not be required to include important protections against the loan features that drove the highest failures in the mortgage boom.
– Lending – If more borrowers are forced into the non-QM market, lenders and investors will be at greater risk of violating ability to pay violation and anti-steering rules. As a result of these increased risks, these loans are either less likely to be made or else made at increased cost to consumers.
– Housing market – If the parameters of the QM are not clear, risks become unpredictable, forcing lenders to decrease their risk tolerance and operate well within the standards. Such an outcome will lessen both the availability and affordability of credit for far too many borrowers.
“Creating a broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders reasonable protection against undue litigation risk, will help ensure revival of the home lending market,” wrote the organizations.
The following organizations signed on to the letter.
1 American Bankers Association
2 American Escrow Association
3 American Financial Services Association
4 American Land Title Association
5 American Securitization Forum
6 Asian Real Estate Association of America
7 Center for NYC Neighborhoods
8 Community Associations Institute
9 Columbus Housing Partnership
10 Community Mortgage Banking Project
11 Community Mortgage Lenders of America
12 Consumer Bankers Association
13 Consumer Mortgage Coalition
14 Financial Services Roundtable
15 Habitat for Humanity International
16 Housing Policy Council
17 Independent Community Bankers of America
18 Leading Builders of America
19 Mortgage Bankers Association
20 Mortgage Insurance Companies of America
21 National Association of Hispanic Real Estate Professionals
22 National Association of Home Builders
23 National Association of Mortgage Brokers
24 National Association of Neighborhoods
25 National Association of Real Estate Brokers
26 National Association of Realtors®
27 National Community Reinvestment Coalition
28 National Council of State Housing Agencies
29 National Housing Conference
30 Real Estate Services Providers Council, Inc. (RESPRO®)
31 Real Estate Valuation Advocacy Association
32 The Appraisal Institute
33 The Realty Alliance