Congress did not intend to impose additional legal liability on lenders that originate properly underwritten loans, according to 106 members of the House of Representatives.
In a letter, the House members urged the Consumer Financial Protection Bureau (CFPB) to adopt a qualified mortgage rule that provides lenders with a safe harbor from litigation.
“We believe that the final rule must structure the QM as a strong legal safe harbor, not a rebuttable presumption,” the July 12 letter says.
The letter notes a rebuttable presumption would provide “little legal certainty for the creditor, and thus little incentive to make a qualified mortgage, which limits loan fees and features.”
Under the QM provisions of the Dodd-Frank Act, lenders must determine the ability of the borrower to repay a loan by verifying income and debts. Congress also directed the bureau to set underwriting standards for QM loans and ban negative amortization and other risky loan features.
However, the 106 signers of the letter want the bureau to know that Congress does not want properly underwritten QM loans “weighed down” by legal uncertainty for the life of the loan.
“Therefore, we urge the CFPB to craft a safe harbor that strikes the right balance between protecting consumers from poorly underwritten mortgages while ensuring they have access to safe and affordable mortgage products,” the letter says.
Reps. Shelley Capito, R-W.Va., and Brad Sherman, D-Calif., circulated the House letter and gathered the signatures. The CFPB is planning to finalize the QM rule before Jan. 21.
