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NAR led a coalition of more than 35 associations to send a letter to the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (FED), the Federal Deposit Insurance Corporation (FDIC), the Securities and Exchange Commission (SEC), the Federal Housing Finance Agency (FHFA), and the Department of Housing and Urban Development (HUD), requesting a delay in their review of the qualified residential mortgage rule.
In the wake of the financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act. The law affects housing finance in two ways. First, it makes originators liable to prove that a borrower/recipient can afford the mortgage they originate under the ability to repay (ATR) rule and an exemption to the ATR called the qualified mortgage rule (QM). Second, it forces securitizers of mortgages to maintain sound capital and quality standards for the mortgages they bundled and sell to investors under the qualitied residential mortgage rule (QRM).
The QRM rule, the focus of this coalition letter, requires securitizers to hold an increased amount of capital if the loans they securitize are of a lower quality. As a result, borrowers who use non-QRM mortgage typically face higher rates and limited access.
To avoid higher costs and market disruptions, regulators created a broad measure of safe loans in the QM rule and then set QRM equal to QRM, so that the majority of mortgages were high quality and could be bundled into QRM-eligible securities. This alignment has maintained low costs and good access for the majority of the market.
Earlier this year the regulators announced their intent to review and update the QRM. However, the CFPB is reviewing the QM rule and announced a delay. Because the QRM rule depends on the QM rule, NAR and the co-signers have asked the regulators to delay their review of the QRM until the CFPB completes its review of the QM and finalizes any changes.