Lenders facing legal challenges with respect to possible violations of the “ability to repay” standards in the qualified mortgage rule likely will face significant loan repurchase requests from Fannie Mae and Freddie Mac, as well as rescissions in coverage by mortgage insurers, according to the Clearing House Association (CHA).

“Certainly investors will demand that lenders buy back any loan that is found to have violated the ability to repay requirements. However, it is also possible that investors will demand that lenders buy back loans with similar characteristics, particularly if the loans are delinquent, even if those loans have not been challenged on ATR grounds,” CHA says in a comment letter on the Consumer Financial Protection Bureau’s (CFPB) QM proposal.

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