Housing industry groups are pressing the Consumer Financial Protection Bureau (CFPB) to craft a qualified mortgage rule that shields lenders from meritless litigation and ensures access to affordable and sustainable mortgages.
“Our purpose is to reiterate our strongly held view that the QM should be structured as a legal safe harbor with clear, well-defined standards,” 23 industry groups say in a new joint letter to the bureau.
The QM rule requires lenders to properly evaluate a borrower’s ability to repay a loan before approving the credit. Lenders want the protection of a safe harbor if they follow the guidance issued by CFPB.
The alternative to a safe harbor is a “rebuttable presumption,” which is favored by some consumer groups.
But industry groups, like the American Bankers Association (ABA), fear a rebuttable presumption would provide an incentive for consumer attorneys to sue if a borrower goes into default.
“The unpredictability of a rebuttable presumption would create litigation risks too great for most lenders to continue offering mortgages to all qualified borrowers,” said ABA president and chief executive Frank Keating.
“This collection of housing groups, Realtors, banks and credit unions are gravely concerned that a rebuttable presumption would be damaging to credit availability, communities and the housing market,” he added.
The CFPB is expected to issue a final QM rule this summer that will also set underwriting standards for QM loans. Once the rule goes into effect in January 2013, loans that don’t meet the QM standards will be difficult to sell or securitize.
“The final rule should increase the availability and affordability of sustainable mortgage credit as Congress intended, not unduly reduce its availability or increase its costs,” the April 27 industry letter said.