Mortgage Bankers Association executives took to their soapboxes Thursday, urging regulators to align the Qualified Residential Mortgage standard and Qualified Mortgage rule — ensuring that all credit-worthy borrowers can access competitively priced mortgage capital that have the ability to repay.
Furthermore, adopting the alignment of QRM with QM will ensure that investors can rely on an originator’s assertion regarding the underwriting of loans, explained MBA CEO Dave Stevens.
In August, regulators offered new proposals to the QRM rule, lessening the requirements for lenders who want to sell mortgages off to the secondary market without having to retain a slice of the credit risk.
Six federal regulatory agencies announced two approaches to redefining the QRM rule: the preferred rule — aligning QRM with QM — and the alternative approach —requiring lenders to retain a stake in the credit risk when mortgages sold off are originated without at least a 30% downpayment.
“The alternative approach would burden borrowers with restricted access to credit and added costs, neither of which can be justified by anticipated gains in loan performance,” Stevens argued.
MBA believes aligning QRM and QM definitions will allow a greater number of borrowers to benefit from lower mortgage costs, resulting from greater access to the private investor market, leading to safer and more sustainable loans.
Additionally, the preferred approach will streamline the regulatory burden on an industry where the cost of regulation have become overwhelming, Stevens noted.
The alternative approach is strongly rebutted because it restricts too many consumers’ access to affordable credit — consequently excluding a greater number of minority borrowers from a wide pool of loans.
Additionally, MBA thinks the alternative approach is unnecessary because the investor market can easily ascertain and price credit attributes such as loan-to-value ratio.
Most importantly, the alternative approach would raise cost to borrowers because consumers who do not qualify for QRM will pay higher prices for private-label credit, increasing government involvement in the mortgage market.
"The QRM definition sets rigorous standards for sustainable mortgage lending, which ensure that borrowers have the ability to repay their mortgage, significantly lowering delinquencies and defaults," Stevens stated.