MBA Letter Addresses CFPB Ability-to-Repay/QM Rule Assessment

The Mortgage Bankers Association sent a letter this week to the Consumer Financial Protection Bureau, addressing the Bureau’s Ability-to-Repay/Qualified Mortgage Rule and offering a set of recommendations to improve the rule.

The letter (1) comments on the feasibility and effectiveness of the plan; (2) data and information that may be useful for executing the plan; (3) recommendations to improve the plan; (4) data and other factual information about the benefits and costs of the ATR/QM rule; (5) data and other factual information about the rule’s effectiveness in meeting the purposes and objectives of the Dodd-Frank Act; and (6) recommendations for modifying, expanding and eliminating the rule.

“The ATR/QM rule, which MBA generally supports, sets the standards for safe, sustainable mortgage credit in the nation. It therefore is critically important to determine how the rule has been meeting its objectives based on available evidence and data and to discern areas in which adjustments are needed,” wrote MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills.

The letter notes while the assessment plan appears both feasible and effective, additional research should be directed to areas of concern to help expand the safe harbor to cover more creditworthy borrowers. The letter also identifies concerns with the current rules, including the need to develop a workable alternative to the QM patch.

“We recommend specific data and information that may prove useful, including MBA member (and other stakeholder) interviews and survey data, as well as specific areas to improve the assessment including reviewing cures and corrections,” the letter said. “We look forward to further opportunities to comment to improve both the assessment and the rule. MBA strongly believes a well-considered report with stakeholder input is essential to developing necessary revisions to this important rule.”

Based on member feedback since the rule’s implementation in 2014, MBA has long-advocated the following changes:

— Expanding the QM safe harbor to encompass a greater number of loans to serve a greater number of consumers with safe and affordable loans.

–Increasing the threshold below which small-purchase loans are defined to permit increases in the points and fees limits to make smaller loans economically feasible. The current metric is too low considering the average loan size is over $240,000.

–Approving alternatives to Appendix Q, including commonly accepted underwriting standards such as GSE, FHA, VA and RHS standards to use in conjunction with the default QM.

–Replacing the patch and the default QM with a better, more transparent set of criteria including compensating factors. MBA has urged the CFPB to start the process of working with stakeholders to develop a transparent set of criteria, including compensating factors, to define a QM–replacing both the QM patch and the 43 percent DTI standard.

–Pending development of a better replacement, the patch is essential and should be extended indefinitely and expanded to include jumbo loans that would be eligible for purchase and guarantees by the GSEs if not for their loan amount.

–Revising the points and fees definition to exclude lender-affiliated companies.

–Broadening, maintaining and extending the right to cure for points and fees to apply to DTI and for other technical errors on all loans, regardless of when the loan is closed. MBA believes there is a need for both a permanent points and fees cure as well as a DTI cure.

–Making holistic changes to the ATR rule to better serve the entire market–not particular types of institutions with particular business models.