Well-known members of the housing industry call for an end to the QM Patch, and reform for Qualified Mortgages.
A policy allowing government-sponsored businesses Fannie Mae and Freddie Mac to sidestep stricter mortgage underwriting requirements is set to expire in 2021, and while it may seem a long way off, its pending departure has sparked widespread debate throughout the industry.
Known as the QM patch, the rule excludes GSE -backed loans from complying with the full scope of the Ability to Repay / Qualified Mortgage rule, which requires lenders to adequately prove a borrower's ability to repay the loan. their debt in the process of underwriting.
Recognizing that the rule had transformed an increasing market share into the GSEs, the Consumer Financial Protection Bureau stated the purpose of allowing the rule to expire as planned.
The rule also includes a stipulation that a drill rower's monthly debt-to-income ratio may not exceed 43%, but this condition does not apply to government-sponsored loans ( Federal Housing Administration Department of Veterans Affairs or Department of Agriculture ).
But the Mortgage Bankers Association held that the CFPB should not allow the QM Patch to expire without a defined plan to continue to serve creditors beyond the 43
] "Patch's expiration without a defined plan to continue serving these lenders will have dramatic negative consequences for the housing market, resulting in more expensive or unavailable credit," the MBA explained in a statement. a letter to the CFPB.
Here are some of the suggestions that the MBA for the CFPB had to reform the QM standard before the QM Patch expired to achieve the appropriate balance between the two bureaucratic legislation, which required consumption r protection and promotion of affordable credit:
- Eliminate the strict 43% DTI ratio threshold and Appendix Q, or any prospect of it as a standard documentary.
- If the bureau maintains a level DTI ratio. it does not, however, fully predict payment capability, allow the use of other government-approved documentation requirements and validation standards to determine DTI ratios in addition to Appendix Q.
Norbert Michel of The Heritage Foundation and Edward Pinto and Tobias Peter of AEI Housing Center also submitted a letter of comment to the CFPB on the QM Patch. In it, they made several recommendations including:
- The bureau should remove the 43% DTI limit applicable to QM loans and in exchange for a stressed Mortgage Default Rate limit.
- CFPB should test the effectiveness of residual income method in reducing default rates under fatigue conditions.
- The bureau should assess the effectiveness of different levels of principal, interest, tax and insurance reserves in coming from reducing default rates under fatigue conditions. .
The National Association of Realtors has estimated that more than 3.3 million financial house purchases since 2014 have fallen into this market segment. The NAR explained that any disruption could increase costs and reduce access to mortgages for hundreds of thousands of otherwise trusted homebuyers each year. meaning and patch, "said President John Smaby." As we work with CFBP to come up with a permanent solution that will ensure stability in the housing market, we will continue to advocate that any replacement rule should be holistic, see the complete borrower and should build on the fluid that the QM patch provides to the market. ”
The Urban Institute also sent a letter to the CFPB, urging the bureau to change its repayment and creditworthiness guidelines by dropping the debt-to-income ratio altogether. . because the tank thinks it is a weak predictor of default. Its researchers also recommend an increase in the rate of spread — the bright line that separates safe harbor loans from refinancing, from 150 to 200 basis points.
Furthermore, the gourd of the largest lenders in the country is also leading a coalition calling on the CFPB to make changes to the Repay / Qualified Mortgage rule.
Specifically, the group, which included Bank of America Quicken Loans Wells Fargo and Caliber Home Loans wanted to lose to the CFPB including required debt-to-income ratio of QM policy.