The QM regulation is designed to ensure that lenders only make loans to borrowers who have the ability to repay the loan. If the QM regulation is too narrowly defined it could threaten the burgeoning housing and economic recovery by denying creditworthy borrowers access to safe, quality loan products, said NAR’s 2012 Vice President and Liaison to Government Affairs Scott Louser in testimony before the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit.
“REALTORS® are the leading advocate for housing issues and believe that one of the greatest issues affecting the housing market is uncertainty in the rules that govern housing finance,” said Louser, a broker/owner in Minot, N.D. “The first step to creating certainty in the housing finance system is to broadly define QM so that it encompasses the vast majority of the safe, high quality lending being done today.”
In his testimony, Louser said that current underwriting standards are already tight and are contributing to the slow housing market recovery. NAR believes that an unnecessarily narrow QM definition that covers only a modest proportion of loan products and underwriting standards and serves only a small proportion of borrowers would undermine prospects for a full housing recovery and threaten the redevelopment of a sound mortgage market.
Louser said that a narrowly defined QM would put many of today’s loans and borrowers into the non-QM market, which means that lenders and investors would face a high risk of a steering or ability to pay violations. The increased risks would result in costlier loans that lack important consumer protections, he said.
To that end, NAR supports a QM definition that provides strong incentives for lenders to focus on making well-underwritten mortgages affordable and abundantly available to all creditworthy borrowers, which requires a legal safe harbor for lenders and investors and a clear, objective definition of the QM that is not unduly restrictive.
“Creating a broad QM that establishes strong consumer protections, promotes mortgage liquidity, incorporates important ability-to-repay standards, and offers lenders a safe harbor that reduces litigation exposure benefits lenders, investors and consumers will help ensure the revival of the home lending market,” said Louser.
Louser testified that another area of concern to REALTORS® and the industry is the definition of points and fees in the QM provision, which limits the total points and fees collected by lenders and their affiliates to 3 percent of the loan amount. He said this discriminates against real estate and mortgage firms with affiliates involved in the transaction and limits companies from offering full services to clients. NAR urges Congress to pass H.R. 4323, the “Consumer Mortgage Choice Act”, so that consumers can fully benefit from greater competition between affiliated and unaffiliated mortgage lenders.
Louser said that honoring Congressional intent by crafting a broad QM definition, along with correcting the 3 percent cap on points and fees, will ensure the availability and affordability of credit to consumers. “If we are able to get this right, the market will continue its recovery and move toward stability,” he said.
For more information, visit www.realtor.org.
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