Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

"From the minute you call me to the minute we close, I have your back. No hassles, no banker’s hours & quick response times." - Scott Storace

  • Home Loans up to $3,000,000
  • Interest Rate Float Down Option

Have Questions? Call 949.973.0141

Congress Dismisses CFPB About Qualified Mortgages

The Debate Rages on Regarding Qualified Mortgages

The Debate Rages on Regarding Qualified Mortgages

Orange County, CA – A House Financial Services subcommittee heard testimony from two officials of the Consumer Financial Protection Bureau (CFPB) on Wednesday, May 22nd regarding qualified mortgages.

Peter Carroll, the Assistant Director for Mortgage Markets for the CFPB, and Kelly Thompson-Cochran, their Assistant Director for Regulations, testified in front of the House Subcommittee on Financial Institutions and Consumer Credit for hours. The testimony largely surrounded the process the CFPB used to arrive at the new qualified mortgage rule that goes into effect on January 10th, 2014.

The rule, they testified, came into existence after a lengthy process in which the CFPB considered nearly two thousand pieces of feedback from stakeholders, and a second comment period focused on the needs of and impacts on small creditors.

Because credit remains relatively inaccessible in many places compared to pre-recession numbers, CFPB designed the rule “not just to ensure more responsible lending by curtailing certain problematic practices, but also to encourage creditors to provide responsible loans to consumers in all segments of the covered market.”  The Assistant Directors said the rule “strikes a careful balance between providing bright lines to give certainty and clarity to creditors while also allowing flexibility for the mortgage market to evolve and innovate in ways that encourage the provision of responsible credit.”

They were also very eager to point out that while the qualified mortgage does limit many ‘toxic lending’ norms like negative amortization, one thing it deliberately doesn’t do is limit underwriting procedures. “The Bureau believes that-subject to certain floors created by the Act-it is entirely appropriate for creditors to employ a variety of standards to evaluate their customers’ repayment ability,” the testimony reads. “By rooting out reckless and unsustainable lending without dictating specific underwriting models, we believe the rule protects consumers and strengthens the housing market while preserving flexibility for creditors.”

“We sought to structure the rule in a way that allows room for a range of reasonable underwriting models used by different types of creditors in today’s market.  We were concerned that as the mortgage market strengthens, the rule should function to provide appropriate safeguards without becoming a straightjacket.  We balanced these considerations in many places, both in leaving flexibility for reasonable underwriting practices under the ability-to-repay standard and in crafting different types of qualified mortgages that use different sets of safeguards to ensure that affordability is being appropriately considered,” the two officials concluded.

The House Subcommittee’s Response

“My main concern with the qualified mortgage rule is that the people who do not fit the one-size-fits all criteria for qualified mortgage loans will not be able to access mortgage credit,” said Subcommittee Chairman Shelley Moore Capito (R-WV).  “Despite the CFPB’s claims that lenders will issue non-QM mortgages, my conversations with lenders lead me to believe that few, if any, will be willing to issue these types of mortgages.”

Act 2: The Mortgage Industry’s Response

Four days ago, the House Subcommitte met again regarding this proposed changes. This time they heard from industry insider’s who stressed that the proposed changes would very likely curtail lending. They implied that most lenders won’t risk the repercussions of falling outside the qualified mortgage boundaries.

Scott Storace

If you like this post please share it!

Comments are closed.