The Federal Housing Administration is constructing its own version of the qualified mortgage rule, said FHA Commissioner Carol Galante, during the JPMorgan Chase Securitization Research conference.
Under the Dodd-Frank Act, the FHA has the authority to review the Consumer Financial Protection Bureau‘s final QM rule and issue a separate ability-to-repay rule for loans guaranteed by FHA.
“Finalizing QM is next on the regulatory agenda. I’m limited to what I can say on that, but we do understand the need to create consistency and alignment between the definition of QM and QRM,” Galante said.
She added, “Like QRM, we want to make sure that the FHA QM definition makes clear the rules of the road for FHA-insured lending moving forward.”
The QM rule, which is for the most part finalized, defines abusive lending practices and offers legal protections to lenders issuing loans without high fees and other risky assets. The impending qualified residential mortgage standard is a potential subset of the QM rule, with QM linking both together.
Galante also noted during her featured speaker address that while the housing market and economy have shown significant improvements over the past year, many areas need rebuilding to create a stable market for the future.
Some areas of concern include the time and effort it takes to revamp hardest-hit communities and today’s borrowers inability to access credit, the FHA leader said. Galante also sees a need to strengthen the FHA single-family insurance fund while adjusting the long-term housing finance regulatory framework.