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Hey, did I tell you that the CFPB is in process of their required review of the effects of the QM/ATR rules implemented under Dodd-Frank? Well, they are!
CFPB is looking into several lending areas to determine to successes or failures of the new rules. They’ll be reviewing quantitative data for loan originations, default rates, and loan performance.
The data reviewed will include such things as:
- HMDA data for marketing and lending trends
- Third party servicing data for loan performance
- Fannie & Freddie public loan level info
- Information available from the National Mortgage Database
- Data requested and collected from a limited number of creditors and other stakeholders.
The bureau will analyze the data gathered to determine what effects the new rule had on mortgage lending since it was implemented.
Has the rule stymied or benefited lending?
Are consumers being properly protected while having ample financing available or are some being denied their shot at the American Dream because of restrictive rules and/or lender uncertainty?
One area needing careful consideration is what constitutes a Qualified Mortgage (QM). By now, lenders are very familiar with the terms and the safe harbor offered in the law.
However, many of the loans made today qualify for this safe harbor under the temporary exception allowing coverage for loans approved for delivery to one of the agencies.
This ‘patch’ as it has become known expires in 2021. When it does, as the law is now written, a QM loan will be limited to a 43% total DTI. That’s not so good.
Think of it, how many loans have you had approved through DU, LP, or the TOTAL Scorecard with a DTI above 43%? Those loans would no longer qualify as a QM.
Additionally, to qualify for the QM loan rebuttable presumption, a lender must validate the borrower’s repayment ability. Under the current rules, this is based on Appendix Q to the law. Appendix Q is basically the old FHA underwriting guidelines.
Do we want these guidelines to continue to determine the fate of lenders if challenged under the QM/ATR rules? I don’t think so.
There is no sunset, under the law, of a lender’s liability for the repayment ability. The lender is liable for the life of the loan, regardless of what may transpire with the consumer, the economy, or otherwise.
Shouldn’t a lender get some reprieve from the ATR rules when a consumer pays regularly for some predetermined period, say 3 years?
There’s a lot at stake. Thankfully the MBA, as usual, has taken up the mantle to speak for the industry. I’ve been on several calls with the MBA staff and other lenders working on comments and recommendations to CFPB in connection with this assessment.
For your information, HERE is the complete CFPB request for comment. Although the period is due to close on July 31st, I’m sure your comments are still welcomed by CFPB.
Get involved, it’s your industry. Be glad and thankful that MBA does.
