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Earlier this week, the National Association of REALTORS® (NAR) sent a letter to the Consumer Financial Protection Bureau (CFPB) commenting on its proposed QM replacement rule.

The QM patch provides all loans eligible for GSE-backing the QM status and legal protections; it is set to expire in January. At that time, all previous QM patch loans will need to comply with the stricter, market-wide definition, which has a hard 43 percent cap on the back-end DTI (Debt to Income) and other verification requirements. According to NAR, if that happens, consumers could be forced to pay more or be pushed out of the market entirely.

“Homeownership is an integral part of the American Dream and the QM rule should be flexible enough to adapt to changing life patterns, including for individuals and families with non-traditional income documentation,” NAR president Vince Malta writes in the letter. “Underwriting is the foundation for America’s housing finance system that supports this American Dream. Given what America is facing right now, with the financial strain and threat to housing security for many families across the country, the CFPB’s rules process should not be rushed. A comprehensive re-evaluation of the patch and a market-wide QM requires a thorough vetting of all alternatives and their impact on both competition and consumer access under all economic conditions.”

According to the letter, NAR requests that:

1. The proposed safe harbor be expanded from 150 over APOR to 200 over APOR. According to NAR, in doing so, more borrowers will still qualify even if their pricing rule is problematic.

2. The CFPB should eliminate non-consumer credit related factors (e.g. lender’s business model, refi volume, race, etc.) from lender’s pricing.

3. The CFPB should eventually transition to a better model that limits market instability and consumer impacts and which investors actually like

“REALTORS® recommend that the CFPB first expand the proposed rule and develop means to eliminate non-consumer related factors in pricing,” Malta concludes. “Over the long-term, the CFPB should transition to a framework that better protects both consumers and the market.

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