The Consumer Financial Protection Bureau is reportedly leaning in favor of establishing a safe harbor for lenders who write high-quality, qualified mortgages that end up the subject of litigation later on.
Researchers at Compass Point Research & Trading released a report citing a Wall Street Journal article that claims the CFPB is leaning in the direction of giving lenders protection in court from failed loans as long as those loans are high-quality and comply with the qualified mortgage rule.
The qualified mortgage rule is a key part of Dodd-Frank regulation in that it establishes an “ability to pay” benchmark that originators have to follow. And if they don’t follow the guidelines, they can end up with legal liabilities for any loans that default.
A safe harbor from the CFPB as drafted in the agency’s final rule will give financial firms the security to make loans with clarity, the industry has argued.
“Point being, the QM rulemaking will largely define the contours of mortgage lending,” Compass Point wrote in its research note. “Lenders have repeatedly warned that they will retrench back to only offering QM loans, thereby limiting mortgage credit availability. While we believe loans will ultimately still be originated outside of the QM definition, these rules will define the primary contours of residential mortgage lending standards.”