Final QM Rule For Small Lenders Out Soon

CFPB representatives testifying this week on the bureau’s ability-to-repay/qualified mortgage rule said a final rule is expected to be issued soon detailing QM standards affecting small lenders.

The CFPB issued its final rule on QM in January, but it simultaneously issued proposed amendments to accommodate lending by smaller institutions, including those operating outside rural and underserved areas. The QM rule includes a maximum 43 percent debt-to-income ratio as one of the qualifiers for a QM designation, but the proposed amendments for small lenders would ease this as long as they consider DTE or residual income before making the loans. Still, other defined QM requirements would apply.

A credit union would be defined as a “small creditor” under the rule if it had less than $2 billion in assets and, with its affiliates, extended 500 or fewer first-lien mortgages annually.

NAFCU General Counsel and Vice President of Regulatory Affairs Carrie Hunt, in a letter sent in advance of Tuesday’s hearing, acknowledged the CFPB’s statements that non-QM loans are not prohibited by the rules. However, she said the rules will still lead to a tightening of mortgage credit for borrowers who should be able to get loans. She also noted a recent NAFCU survey showing many credit unions say they plan to stop issuing loans that do not meet the QM standards.

Lawmakers in Tuesday’s hearing also repeated the concerns of small credit unions as well as community banks over the possibility of tightening in mortgage credit.

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