The American Securitization Forum (ASF) filed its comment letter on proposed rulemaking as required under the Dodd-Frank Act for qualified mortgages (QMs) with the new Consumer Financial Protection Bureau (CFPB) and the Board of Governors of the Federal Reserve System (FRB).
In its comment letter, the ASF called on the CFPB and the FRB to enact a QM definition that is based on objective criteria that can be determined when a loan is made and that establishes safe harbor protection.
The proposed rulemaking for QMs requires that if a loan is deemed not a QM, significant liabilities will attach to the ownership of that mortgage loan.
These are separate and distinct proposals from the qualified residential mortgage or QRM that would exempt a mortgage from a 5% risk retention requirement if included in a securitization.
According to the ASF, reasonable access to credit will depend upon the outcome of the qualified mortgage determination. Lenders are likely to steer away from originating mortgage loans that fall outside the standard because of liability concerns that would keep investors from purchasing these loans in the capital markets.
"It is critical that the CFPB enact a qualified mortgage definition that is based on objective criteria that are determinable when the loan is made and result in safe harbor protection," said Tom Deutsch, executive director of the ASF. "An after the fact finding of non-compliance would result in substantial liability for investors and other assignees down the capital markets chain.