The 'qualified mortgage' rule that the Consumer Financial Protection Bureau (CFPB) is working on is expected to limit the kind of mortgages that lenders can make – but may also curb the size of the loans they originate as well.

The Dodd Frank Act contains a 3% points and fee limit on what lenders can charge in making a QM loan that has a loan balance greater than $75,000.

Due to the fixed costs of originating a loan, the Mortgage Bankers Association (MBA) contends some lenders will bump up against the 3% points/fees test on loans smaller than $125,000.

MBA senior vice president Steve O'Connor said the $75,000 small loan exemption is “too low” and needs to be raised to $150,000.  Otherwise, lenders will be forced to “discriminate against smaller balance loans.”

Congress passed the QM provision to shield well-underwritten and sustainable mortgages from lawsuits.

The 3% points and fee test has nothing to do with quality underwriting or the borrower's ability to repay a loan, according to K&L Gates attorney Larry Platt – but it will “unwittingly” trip up a lot of loans.

“It's a throw-in provision that will choke off credit,” Platt told National Mortgage News.

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