(Source: MBA) — Debra W. Still, CMB, Chairman of the Mortgage Bankers Association (MBA), issued the following statement on the final Qualified Mortgage/Ability to Repay rule released today by the Consumer Financial Protection Bureau (CFPB).
“Director Cordray and the staff at the CFPB undertook a deliberative and inclusive process to create this rule, and we commend their approach and effort. Every step of the way, they took the time to listen and understand the range of stakeholder concerns with this rule, which may be the single most impactful rule that will affect mortgage lending in this country coming out of the Dodd-Frank law. We look forward to continuing to work with the CFPB on this and other forthcoming rules.
“MBA agrees that the goal of this regulation, ensuring that borrowers receive loans that they can repay, is in everyone’s best interest. We cannot, and should not, go back to the high risk lending environment of the early 2000s. Our concern has always been that we balance this goal with other housing policy objectives, particularly the objective to ensure the availability of mortgage credit to qualified borrowers. And right now, credit is tighter than at any point we can remember.
“The rule was just issued, and we must examine it carefully. Nevertheless, we applaud the Bureau for offering a legal safe harbor to lenders when they originate loans that meet the rigorous ‘qualified mortgage’ standards in the rule. This approach should allow lenders to offer sustainable mortgage credit to a great number of qualified borrowers without having to risk unreasonable and overly punitive litigation and penalties.
“This is a very complex rule. We remain concerned that certain aspects of it could curb competition, increase costs and tighten credit availability for borrowers. In particular, the 3% cap on points and fees appears to be overly inclusive as it relates to compensation and affiliates. Loans with the same interest rate, terms and out of pocket costs should be treated the same under the rule regardless of the organizational structure or business model of the lender.
“Additionally, we will be looking carefully at whether the interest rate threshold for the safe harbor, which is set at 150 basis points above the benchmark rate, will adversely impact too many borrowers. These pricing-related restrictions need to be carefully examined to ensure that they do not unnecessarily restrict consumer access to ‘qualified mortgages,’ including smaller balance loans, as well as jumbo loans.
“Ultimately, the final verdict on this rule will be made by the market. We believe the rule will effectively block the return of risky product features and inadequate documentation. If it also provides lenders the certainty needed to originate qualified mortgages broadly across the market to creditworthy borrowers, it will have been a success. However, if the result is a tightening of credit as lenders pull back from offering loans that would create greater risk of litigation, the CFPB may need to quickly revisit the rule to avoid harming the housing recovery.”