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NAR sent a letter to the Consumer Financial Protection Bureau (CFPB) outlining REALTORS®' position in response to the CFPB's proposed replacement to the market-wide QM rule.
The QM patch, which provides all loans eligible for GSE-backing the QM status and legal protections, is set to expire in January. When that happens, all formerly QM patch loans would need to comply with the more stringent, market-wide definition which has a firm 43% cap on the back-end DTI and other verification requirements. If that happens, a significant portion of the market would likely shift to the FHA, paying more, or out of the market all together. To avoid this scenario, the CFPB proposed an alternative market-wide QM rule that is based on lender pricing in relation to the average prime offer rate. Any loan priced less than 150 basis points over average prime offer (e.g. less than or equal to 5.5% vs an APOR of 4%) would be a safe harbor QM with the highest legal protections for the lender, while loans from 150 to 200 would receive rebuttable presumption designation. Loans above 200 basis points over APOR would be non-QM.
NAR's response thanks the CFPB for its actions in avoiding the more stringent rules and requests that:
- The proposed safe harbor be expanded from 150 over APOR to 200 over APOR. In doing so, more borrowers will still qualify even if the proposed pricing rule is problematic.
- The CFPB should eliminate non-consumer credit related factors (e.g. lender's business model, refi volume, race, etc.) from lender's pricing measure. And,
- In time, the CFPB should transition to a better model that limits market instability and consumer impacts and which investors find appealing