August 2, 2011
The mortgage market of the future can drive economic growth without shutting out responsible home buyers. Here is an overview of CRL's recommendations to regulators:
- The Agencies should delay finalizing the QRM rule until after the final QM rule has beenissued. The QRM final rule should be harmonized with the QM final rule to facilitate compliance.
- QRM loans should meet all QM requirements.
- Just as the QM requirements will not, and should not, include down-payment or LTV, neither should the QRM requirements. The point is not that down-payments should not be required, but rather that they should be set by the market. QRM loans should be available to creditworthy borrowers who demonstrate a documented ability to repay the loans and can afford the loan's down-payment requirements, without government-imposed wealth-based barriers such as down-payment requirements.
- The final rule defining QM loans will include debt-to-income ratio (DTI)/residual income standards of Dodd-Frank's ability to repay requirements. To avoid unnecessary regulatory complexity, the Agencies should await the final rule on QM and adopt the same approach for QRM.
- Similarly, the Agencies should defer to the QM final rule on underwriting standards and should not include separate credit history requirements. At all events, the final rule should not limit credit qualifications to the exclusive "best of the market" standards set out in the proposed rule.
- The Agencies correctly suggest caps on interest rate increases in order to guard against payment shock and follow the statute. However, the proposed caps do not, on their own,provide sufficient protection. The rule also should prohibit QRM ARM loans from including rate increases in excess of one percent per year and five percent over the life of the loan.
- We support the Agencies' servicing standards in the proposed rule.