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Thursday, July 12, 2012

ABA: QM Standard Must Encompass ‘Vast Majority’ of Loans

The “qualified mortgage” -- or QM -- standard under the pending ability-to-repay rule should be broad enough to encompass the vast majority of loans being made today, ABA said a statement submitted for yesterday’s House Financial Institutions Subcommittee hearing on the impact of the Dodd-Frank Act’s home mortgage reforms.
The loans being made now are well underwritten without exotic or troublesome features, unlike some of the loans made prior to the economic crisis. If the QM does not include most of these loans, it will unnecessarily restrict credit, harming efforts toward recovery in the mortgage sector.
The association also emphasized that the QM must afford lenders the legal certainty of a safe harbor against liability. “Because liability for an ability-to-repay challenge runs for the life of the loan, without a safe harbor lenders will face potential costly lawsuits for the life of any loan they make.”

ABA explained that the potential expense of defending against such claims would increase loan costs -- because legal costs would be priced into loans -- or drive lenders from the marketplace because they would not want to take on the liability.

The association added that the final ability-to-repay rule also must take into account mortgage-market changes mandated by the Dodd-Frank Act and other regulations. Those changes include the Real Estate Settlement Procedures Act-Truth in Lending Act integration, the new mortgage-loan originator compensation rules, appraisal process reforms and the development of new servicing standards.
The implementation of … these rules must occur in an orderly and coordinated fashion to ensure that disruptions are not created for borrowers, and to provide lenders … adequate time to adjust forms [and] products and [also conduct] training and reprogramming.

Read ABA’s statement.

1 comment:

John Stout said...

I think that in Boston mortgage also implemented this kind of rule. You’re right about the topic you’ve mentioned about the legal certainty of a safe harbor against liability. Do you think this will going to apply in different kind of loan or only apply to mortgage?

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