WASHINGTON—The CFPB is being urged to consider the unique challenges faced by credit unions as the Bureau revises the General QM definition.
Both NAFCU and CUNA sent letters to the agency in response to the CFPB's advance notice of proposed rulemaking to revise the General QM definition in light of the possible Ability to Repay/Qualified Mortgage (QM) patch expiration.
NAFCU's Kaley Schafer urged the CFPB to adopt viable alternatives that allow credit unions "the same protections and benefits, including access to the secondary market, and the ability to provide credit for their members" if the CFPB decides not to extend the patch.
Schafer, NAFCU's regulatory affairs counsel, highlighted benefits of the QM patch in providing credit unions with the ability to sell their loans into the secondary market – generating "vital" liquidity enabling credit unions to make more loans to their members.
Other Recommendations
Schafer also recommended that the CFPB grant an extension of the QM patch "until finalization of any revisions to the General QM definition occur to alleviate market disruptions," and requested revisions to the debt-to-income threshold "that permits flexibility for credit unions while preserving important consumer protections."
Currently, the ATR/QM rule prohibits a creditor from making a mortgage loan unless the creditor makes a reasonable and good-faith determination (based on a set of underwriting standards) that the consumer will have a reasonable ability to repay the loan, including any mortgage-related obligations (such as property taxes).
"The ATR/QM rule is an example of the 'one-size-fits-all' approach to rulemaking that has caused unintended consequences in the mortgage industry," wrote Schafer. "Many of NAFCU's members have decided to extend mortgages only meeting the definition of a General QM, as they are concerned about the ability to sell to the secondary market, and legal and regulatory risks associated with non-QM loans. In addition, there is increased financial risk of non-QM loans.
"Due to decreased marketability of non-QM loans, credit unions must hold these loans on their balance sheets, creating interest rate risk (IRR). IRR is a concern for credit unions, and in order to mitigate this risk they may refrain from originating non-QM loans," she added.
CUNA’s Letter
CUNA stated the CFPB should take special note of the challenges faced by credit unions and other smaller mortgage lenders in the absence of certain expansions of the Qualified Mortgage safe harbor.
“Specifically, we urge the Bureau to couple any expiration or limited extension of the GSE patch with a revision to the overall ability-to-repay regulations that would eliminate: 1) the 43% debt-to-income ratio; and 2) the Appendix Q income verification rules as prerequisites for a mortgage loan to satisfy the requirements of the safe harbor created by the QM definition,” the letter reads. “Each of these actions of essential to preserving access to affordable mortgage credit for millions of credit union members and ensuring the smooth and orderly transition of the secondary mortgage market.”
The letter notes that the GSE patch “has played a critical role” in ensuring access to affordable mortgage credit for credit union members, many of whom are traditionally underserved by the financial services marketplace.
Eliminating the GSE parch would “severely hamper credit unions’ ability to fulfill their specified mission in the mortgage market,” CUNA’s letter says.