ASF wants clear definitions between QM and QRM
The American Securitization Forum submitted a comment letter to the Consumer Financial Protection Bureau that stressed the importance of the proposed rulemaking in establishing “qualified mortgage” standards that are markedly different from what constitutes a "qualified residential mortgage." A QM is a Dodd-Frank requirement that lenders make a reasonable determination that a consumer can repay a mortgage loan. A QRM would exempt a mortgage loan from a 5% risk retention requirement if included in a securitization. The trade group wants to be sure such a distinction is highly enforced. ASF say they “support reforms that strengthen the confidence of the capital markets in the underwriting of residential mortgage loans.” The letter goes on to say that it hopes the proposal would be revised to clearly identify the definition of QM and what the consequences are of a loan rising to the level of QM status. Under the reform, a mortgage lender is presumed to have satisfied the ability-to-repay requirement and receives some protection from liability when it originates a QM. The proposal contemplates and requests protections such as a “safe harbor” from liability and presumption of compliance that could be rebutted. “We look forward to working with the CFPB on this critical issue and hope that our comments help produce a final rule that balances the important need to protect consumers with the legitimate goal of providing institutional investors in the capital markets,” said Tom Deutsch, executive director of the trade group. So far, reports show that recent mortgages are meeting the QM requirements. The vast majority of recent vintage home loans from 2000 to 2010 already met the nine standards that must be achieved for a QM, according to a report from the Government Accountability Office. Write to Matthew Torres.