Do Regulators Pose A Risk To The Qualified Mortgage Rule?

by. Henry Meier

The CFPB’s Qualified Mortgage regulation reminds me of those ads where an adult asks a group of kids a question like  “What type of mortgage is better? A Qualified Mortgage with a Safe Harbor or a non qualified Ability To Repay mortgage that gives you nothing but a mortgage with someone who you are pretty sure has the ability to pay it back?”

Gee, I wonder which one sounds safer?  I wonder what kind of mortgage your typical lender, already overburdened with regulations, is going to offer?

For all its complexity, the baseline goal of the QM rule is to establish a legal framework of underwriting standards so that most people get mortgages they can afford.  The CFPB could have avoided a lot of confusion had it simply called ATR mortgages safe mortgages and QM mortgages really, really safe mortgages.

At least they can count on their fellow regulators to understand the difference, right?  Maybe not.

There is mounting evidence, based on what we are hearing at the Association and what witnesses said during last week’s congressional hearing on the QM rule, that examiners are making it more difficult than the CFPB ever intended for financial institutions to provide mortgages to qualified borrowers.  It’s a serious problem that demonstrates a shocking misunderstanding of what the CFPB is requiring as it tries to balance Dodd-Frank mandates against economic realities.

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