NAR Responds to CFPB's Rulemaking Notice on the Qualified Mortgage Patch Issue

WASHINGTON (September 17, 2019) – The National Association of Realtors® is calling on the Consumer Financial Protection Bureau to improve the Qualified Mortgage definition and patch while supporting an extension before a long-term solution is secured. The current patch expires on January 10, 2021.

“Realtors® believe that homeownership is an integral part of the American Dream. We also believe that the Qualified Mortgage rule should be flexible enough to adopt to changing life patterns in order to ensure homeownership remains within reach for Americans who lack traditional income documentation,” said NAR President John Smaby, a second generation Realtor® from Edina, Minnesota, in the letter. “Underwriting is the foundation upon which America’s housing finance system is built. The CFPB’s rules process should not be rushed as the re-evaluation of the patch and a market-wide QM require a thorough vetting of alternatives and their impact on both competition and consumer access.”

The QM patch was intended as a temporary measure to prevent turmoil in the mortgage and real estate market after the CFPB implemented the Ability to Repay rule. The rule requires lenders to prove that a borrower has the ability to pay back their mortgage at the time of consummation. The ambiguity of the mandate led lenders to request protections, which were delivered in the form of the QM patch.

Analysts estimate that more than 3.3 million home purchases financed since 2014 fall into this market segment, and its disruption could raise costs and reduce access to mortgages for hundreds of thousands of otherwise creditworthy homebuyers each year.

“The National Association of Realtors® has worked alongside the CFPB to find the most palatable, pragmatic approach to improving the QM definition and patch,” Smaby continued. “While we collaborate with the CFPB to develop a permanent solution that will ensure stability in the housing market, we will continue to contend that any replacement rule must be holistic, look at the complete borrower and must build on the liquidity the QM patch provides in the market.”

The National Association of Realtors® is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.