Government Watchdog Examines Effect of CFPB’s Qualified Mortgage Rules

After ongoing industry discussion around mortgage regulations set by the Consumer Financial Protection Bureau defining “qualified mortgage” and “qualified residential mortgage” as requirements of all new mortgage loans, the new rules have been in place for more than a year.

But now, the Government Accountability Office (GAO), a government watchdog that often conducts analysis on new federal programs and rules, is looking into the impact of these regulations, which address lenders’ responsibilities around determining whether a borrower is able to repay his or her loan.

GAO points to the impact of the changes stemming from compliance costs among lenders, but says there is little impact on the investor market for mortgage-backed securities.

“The analyses GAO reviewed estimated limited effects on the availability of mortgages for most borrowers and that any cost increases (for borrowers, lenders, and investors) would mostly stem from litigation and compliance issues,” GAO writes in its findings. “According to agency officials and observers, the QRM regulations were unlikely to have a significant initial effect on the availability or securitization of mortgages in the current market, largely because the majority of loans originated were expected to be QM loans. However, questions remain about the size and viability of the secondary market for non-QRM-backed securities.”

As part of its review, GAO also published a series of recommendations to the six agencies responsible for the QM and QRM rules going forward to the effect they should conduct independent reviews of the rules to develop baseline metrics and assessments of the impact of the regulations.

“To enhance the effectiveness of their preparations for conducting a retrospective review of the QRM regulations, the agencies responsible for the QRM regulations–Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Board of Governors of the Federal Reserve System, HUD, Office of the Comptroller of the Currency, and Securities and Exchange Commission–should develop a plan that identifies the metrics, baselines, and analytical methods to be used and specify the roles and responsibilities of each agency in the review process,” GAO states in its recommendations.

“Furthermore, to account for and help mitigate limitations of existing data and the uncertain availability of enhanced datasets, the six agencies should include in their plan alternate metrics, baselines, and analytical methods that could be used if data were to remain unavailable,” GAO added.

Written by Elizabeth Ecker

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