Aspects of the ability-to-repay rule and "qualified mortgage" standards may make credit access difficult for homebuyers with low credit scores, including many low-income and first-time homebuyers, said Federal Reserve Board Governor Elizabeth Duke.
For example, she said, lenders usually compensate for risk by charging higher rates, points and fees. But, she added, "if lenders originate a first-lien QM with an annual percentage rate that is 150 basis points or more above the rate available to the highest-quality borrowers, lenders receive less protection against lawsuits claiming violation of the ability-to-repay and QM rules."
"The extent to which these rules regarding rates, points and fees will damp lender willingness to originate mortgages to borrowers with lower credit scores is still unclear," Duke concluded.
Read the speech.