January 22, 2014 View entire issue of ANO         Close 

Congress: Qualified Mortgage Rule Could Stall Recovery

Some congressional members have expressed concern that the Consumer Financial Protection Bureau’s new Qualified Mortgage Rule could curb mortgage credit access and slow the housing recovery, HousingWire reported Jan. 14.

The House Financial Services Committee’s subcommittee on Financial Institutions and Consumer Credit called for more flexibility in the QM rule, which took effect Jan. 10.

Subcommittee Chair Rep. Shelley Moore Capito, R-W.V., told HousingWire, “We want to establish a baseline at the start to know what the effects will be.” Capito is largely concerned that lenders won’t write mortgages for those who fall outside the rule, particularly those in the low middle income range. 

QM loans cannot have terms exceeding 30 years, must be insured by the Federal Housing Administration or the U.S. Department of Housing and Urban Development and have limits on points and fees of no more than 3 percent. These types of loans will be designated Safe Harbor Qualified Mortgages. The rule also requires that borrowers’ debt-to-income ratios not exceed 43 percent.

Some lawmakers fear the new rule could hurt homebuyers and shake the still fragile housing recovery, HousingWire reported.

“The exemption for Fannie and Freddie and other (government-sponsored enterprises) is for four years, a blanket protection, which tells me the CFPB and others consider that this will be a rough rollout, and the mortgage market will shrink,” Capito told HousingWire. “If we take away the flexibility for those who fall outside the regulations, it will impact those in rural areas, and the flexibility for institutions to work out what kind of pricing and what kind of risk is acceptable to community banks and small lenders.”

In testimony before the House subcommittee on Jan. 14, Daniel Weickenand, CEO of the credit union Orion FCU, said that the National Association of Federal Credit Unions generally supports keeping borrowers out of mortgages they cannot afford, but he said the association is worried the QM rule will reduce access to credit.

“Unfortunately, a number of mortgage products sought by credit union members, and offered by credit unions, may disappear from the market as they are non-QM loans,” Weickenand told the subcommittee, HousingWire reported. “For example, a forty-year mortgage loan cannot be a QM because it exceeds the maximum loan term for QMs. This has been a product sought by credit union members in high-cost areas as it can help lower the monthly mortgage payment.”

NAFCU and other housing industry advocates want to see Congress act to ease some of the restrictions.

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