The popular assumption that borrowers who fall outside the qualified mortgage definition are essentially blocked from the mortgage finance market is a myth, Consumer Financial Protection Bureau Director Richard Cordray said while speaking in front of the Consumer Federation of America.

During his presentation, Cordray attempted to dispel rumors that the ability-to-repay rule and related QM-standard will disrupt lending to borrowers with debt-to-income ratios above 43%.  

"The rule does not change anything about your current mortgage; it only applies to new mortgages that you apply for on or after January 10, 2014," the director said. "And it does not stop lenders from lending to any borrower with a debt-to-income ratio above 43%; this particular claim is wrong in three ways."

Cordray says lenders can simply rely on the origination standards for loans backed by the government-sponsored enterprises.

Smaller local creditors also are able to issue non-QM loans as long as they hold them within their portfolios. And finally, Cordray said lenders have the ability to issue a non-QM loan by simply using their own judgment after evaluating the borrower’s ability-to-repay and assessing the overall risk.

"Another myth is that this rule restricts down payments; in fact, it says nothing about how much of a down payment you have to make on the house, but leaves that entirely up to you and your lender," Cordray advised.

Still, the residential mortgage-backed securities market remains uncertain about how much risk non-QM loans pose to securitizations.

Moody’s Investors Service released a report, saying litigation risk from non-QM mortgages remains a potential headwind for the private-label RMBS market heading into 2014.
 

Most Popular Articles

NAR bans “pocket listings”

The National Association of Realtors board of directors voted 729-70 on Monday to ban the controversial practice of “pocket listings.”

Nov 12, 2019 By

Latest Articles

Guild Mortgage promotes 3 employees to top positions

Guild Mortgage, an independent mortgage lender, announced late last week that it has promoted three senior members of its leadership team as it continues to grow.

Nov 19, 2019 By
3d rendering of a row of luxury townhouses along a street

Log In

Forgot Password?

Don't have an account? Please