Concerned Housing Industry demands Clear QM rules

April 18, 2012

Rules are important. They help define what is legal and what is not. They keep us from abusing power as well as being jilted by abuses of power. In the absence of clear cut rules, it is easy to misunderstand and be unaware of what is allowed and what is frowned upon.

The need for well-defined rules is the central concern for a group of 33 lenders, housing professionals, consumer advocates and civil rights organizations that came together on Monday with a shared goal in mind: Urging the Consumer Financial Protection Bureau to issue broadly defined and transparent Qualified Mortgage (QM) standards as part of the Ability to Repay regulation.

Mortgage ApplicationThe need to have QM rules clearly described without a grey area is driven by the concern that without properly orchestrated rules in effect, the housing industry’s recovery will be stilted and the resurgence of a dependable mortgage market will be thwarted.

A National Association of Home Builders press release featured the following statement written to Richard Cordray, Director of the CFPB:

“Congress intended that all creditworthy borrowers – especially low- and moderate-income borrowers and families of color – should be extended the important protections of a QM … A broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders reasonable protection against undue litigation risk, will help ensure revival of the home lending market.”

Without broadly defined QM rules, three major problems will become a reality:

  • Many borrowers would be forced into non-QM markets, which are not only costlier but are not required to include important protection against loan features.
  • Lenders would be at greater risk of violating ability to pay violations and anti-steering rules if more borrowers are forced into the non-QM market.
  • Without clear QM parameters, risk becomes unpredictable forcing lenders to lessen their risk tolerance resulting in much less availability and affordability of credit for a large chunk of borrowers.

“Creating a broad QM, which includes sound underwriting requirements, excludes risky loan features, and gives lenders reasonable protection against undue litigation risk, will help ensure revival of the home lending market,” wrote the organizations that signed the letter.

The Ability to Repay regulation requires creditors to determine a consumer’s ability to repay a mortgage before making the loan and establish minimum mortgage underwriting standards.

Hopefully the CFPB will give serious consideration to the concerns regarding QM rules as nobody wants to see a repeat of the housing crisis.

Categories: Economy, Mortgages, NAHB

About The Author

Read All Stories By Mitch Levinson

Mitch Levinson is the author of “Internet Marketing: The Key to Increased New Home Sales” published by BuilderBooks. He is an Internet marketing expert with expertise in search engine optimization, website development, email marketing, social media and CRM consulting services. He is known for creating effective programs that can be tracked through analytics to prove effectiveness and ROI. Mitch is founder and president of MLC New Home Marketing and MLC FlatFee Realty, as well as managing partner of mRELEVANCE, LLC, a Marketing, Communication, Interactive agency with offices in Chicago and Atlanta. He currently leads the Chicago team. A Multi-Million Dollar Sales Producer who earned an MBA in Computer Information Systems and eCommerce, he brings a unique perspective and experience to the field of real estate communications. Mitch combines the two interests in order to help home builders and developers gain a competitive advantage through the Internet and technology. When he isn’t behind a computer, he enjoys participating in sports and coaching his kids’ teams. Mitch resides in Arlington Heights, Ill., a northwest suburb of Chicago, with his family, which includes two rambunctious labs. Visit my Google+ profile.

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