U.S. Representatives Capito (R, WV) and Sherman (D, CA) are circulating a draft of a letter on the Hill which urges the CFPB to “craft a safe harbor [in the Ability to Repay/QM rule] that strikes the right balance between protecting consumers from poorly underwritten mortgages while ensuring they have access to safe and affordable mortgage products.” The letter expresses the concern that, without the safe harbor and the legal certainty that the safe harbor arguably would provide, there is little incentive for lenders to make “qualified mortgages” which may restrict the availability of credit for some borrowers. Under Dodd-Frank Section 1412, a loan that meets the definition of a “qualified mortgage” (QM) is presumed to meet the ability to repay requirements of the rule. In May, 2011, the Fed proposed two possible standards for a QM. The critical difference between the two standards is that, under one alternative, the origination of a QM would create a safe harbor that the lender has complied with the ability to repay requirements and, under the other alternative, it would create a rebuttable presumption of compliance. (See our earlier post on the alternatives and our post on industry support for the safe harbor alternative.) The Ability to Repay/QM regulation is among the most anxiously awaited final rules to be issued by the CFPB and is expected to be issued this summer. Read the congressional draft letter.
