3 Things To Change About The Qualified Mortgage Rule

June 19, 2013 at 8:11 am Leave a comment

Yesterday’s Financial Institutions and Consumer Credit Subcommittee hearing on CFPB’s qualified mortgage regulations ended up being more than a cathartic exercise in bureau bashing.  When you get bankers, supervisors, credit unions, brokers and politicians across the political spectrum agreeing that, as written, there is a real danger that fewer people will get mortgages than are actually qualified, that’s a huge step in the right direction.  Now the question is will Congress step in and make the changes to its own statute in reaction to this broad based consensus?

  • Most importantly, credit unions and banks will overwhelmingly underwrite their mortgages to the qualified mortgage standard in order to receive the maximum protection afforded under the law.  This is not what CFPB wants to see happen.  Its primary concern is that all lenders meet basic ability-to-repay underwriting standards.
  • Under the regulations, in order for a mortgage to get the safe-harbor protection afforded to qualified mortgages, points and fees are generally capped at 3% of the mortgage.  This cap is too restrictive, particularly since it doesn’t carve out an exception for affiliates of the mortgage lender.  The argument of mortgage brokers, to which Congress seems very receptive, is that if Congress comes down too hard on title insurance providers, it may actually do more harm than good to the market place.
  • The CFPB’s current exemption for institutions that have $2 billion or less in assets and that hold 500 or fewer mortgages in their portfolio is too restrictive.  Several of the witnesses made a compelling case that so long as an institution is holding on to its mortgages, Congress shouldn’t be as concerned about dangers of default.  Simply put, an institution is not going to put itself at risk by underwriting mortgages that are nothing more than ticking time bombs in their portfolios.
  • Game 6 of the NBA finals last night, which was ultimately won by the Miami Heat in overtime, ended up being one of the best basketball games you’ll ever see.  This, of course, has nothing to do with qualified mortgages, but it does explain why my blog is a bit late this morning and I always want to make sure you’re paying attention.  Have a great day!

Entry filed under: Advocacy, Compliance, Regulatory. Tags: , , , .

Accounting For The Next Financial Crisis Pending Legislation Impacts Credit Unions

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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