How will the new QM rules affect your credit union?
by. Michael Corn
January 10 marks the beginning of a new ballgame for credit unions making home loans because that’s when the new qualified mortgage rule required under the Dodd-Frank Act takes effect. There have been a lot of predictions and statistics tossed around that have led to confusion about what the new rule is will mean for credit union lenders.
Basically, lenders will be required to ensure that borrowers have the ability to repay their loans and meet more stringent guidelines. Loans that meet these new standards will be “qualified mortgages” and lenders following the guidelines will be “safe” from lawsuits concerning these loans.
Some worry it will be more difficult for first-time homebuyers or those needing jumbo loans to find a mortgage. A survey from May of NAFCU members reported that 44% would not make loans that did not meet the QM standards once the new rules took effect. But a recent article in The New York Times quotes CFPB Director Richard Cordray, stating he does not expect the new reg to affect most borrowers and predicts that 95% of recent mortgages will meet the QM standards.
Historically, credit unions have been more willing to work with their members to find a way to meet their mortgage needs. Yet, despite this flexibility, credit unions consistently have lower delinquent rates on loans because they know their members.. Both NAFCU and CUNA, along with many members of Congress, have asked that the effective date be delayed by at least nine months so lenders will have time to ensure their compliance systems are in place. Cordray indicated this was unlikely, given the CFPB’s mandate from Congress.continue reading »