WASHINGTON–CUNA has joined with more than 20 other trade groups, including the American Bankers Association, in a joint letter to the CFPB urging it to retain its Qualified Mortgage (QM) safe harbor and product features, but remove the debt-to-income (DTI) requirement for prime and near-prime loans when the government-sponsored enterprises’ (GSEs) "patch" expires.
The letter was sent on the same day CFPB Director Kathy Kraninger spoke to NAFCU’s Congressional Caucus in Washington, where she told attendees she believes the agency will put forward a QM proposal that will satisfy credit unions while still protecting consumers.
As CUNA noted, the Temporary GSE QM, a category of QM eligible for purchase by Fannie Mae or Freddie Mac, is scheduled to expire in January 2021 or after a short extension. The CFPB issued an advance notice of proposed rulemaking on whether to propose revisions to the definition of QM in light of the planned expiration.
In the letter, the trade groups propose three points to coincide with any possible expiration of the Temporary GSE QM, to preserve access to sustainable loans for creditworthy borrowers and avoid market disruption. The three points are:
- Eliminate from the general QM category the DTI ratio requirement and the associated Appendix question 1
- Maintain and enhance the existing ability-to-repay (ATR) regulatory language
- Maintain the existing QM statutory safe product restrictions that prohibit certain risky loan features and clarify provisions related to documentation and verification of income.
'Consensus Ideas'
“We believe the consensus ideas that our broad coalition has outlined can help the Bureau craft a forward-thinking QM definition that embraces the technological advances and innovation in the mortgage finance industry,” the letter states. “These considerations would also recognize the rapidly transforming nature of our increasingly diverse economy and would help a new generation achieve homeownership.”
CUNA said it continues to believe that lenders should have greater flexibility in determining whether consumers can satisfy ability-to-repay requirements to ensure and preserve responsible access to mortgage credit for credit union members.
The full letter can be found here.