NAR's submitted a response to the Consumer Financial Protection Bureau (CFPB) regarding its notice of proposed rulemaking (NPRM) on a Qualified Mortgage (QM) seasoning rule. Under the rule, loans that meet product restrictions are held on bank's portfolios for at least three years (e.g. season), and experience no more than two 30-day delinquencies and no 60-day delinquencies will gain the preferred safe harbor legal status versus their initial rebuttable presumption QM or non-QM status.
NAR commented that:
- A seasoning rule may improve liquidity of mortgages (we supported the small-lender rule), particularly for borrowers with income or employment that are more difficult to document;
- CFPB should analyze and monitor for difference in risk taking by large banks vs small banks. The assumption is that holding the loan in portfolio aligns incentives, but if the bank is too-big-to-fail, it might circumvent this design;
- CFPB should reform the QRM rule to allow and incentivize investors to push back dangerous loans that are designed to circumvent the QM rule.