Consortium of 49 Groups Asks Regulators to Align QM, QRM

In a letter sent to the heads of six federal regulator agencies, a consortium of 49 housing industry participants asked that they align the Qualified Residential Mortgage (QRM) regulation they are promulgating with the Qualified Mortgage (QM) rule already released by the Consumer Financial Protection Bureau (CFPB).  The Coalition for Sensible Housing Policy said it sent the request on behalf of "diverse stakeholders united in their commitment to responsible lending and the recovery of the housing market."

The QM, which was issued by CFPB on January 10, sets the standard for fully documented and soundly underwritten mortgage products.  The QRM will define exceptions to the Dodd-Frank requirement that loan originators retain a portion of the loan risk when they sell loans to investors.   The letter says, "The riskier features and products at the heart of the recent financial crisis are not eligible for QM treatment, and they likewise should not be eligible for the QRM. Aligning the QRM and QM standards will encourage safe and financially prudent mortgage lending, while also creating more opportunities for private capital to reestablish itself as part of a robust and competitive mortgage market."

Specifically, the Coalition opposes the addition of stringent down payment and other restrictive requirements to the QRM definition which they say will ultimately limit the ability of private capital to reach lower income households and first-time buyers. The QRM, they maintain, should not be more restrictive than QM.

The Coalition states that the QM definition provides strong underwriting, documentation and product standards that demonstrably lower the risk of defaults consistent with the statutory requirements for the QRM. Synchronizing the QRM definition with the QM would ensure that strong incentives for safe and sound lending are in place, while not impairing the return of private capital to all segments of the mortgage finance market.  Also, they say the QM features are entirely consistent with the investor protection goals of Section 941 of the Dodd-Frank Act, which limits the QRM exemption from risk retention to loans with "product features that historical loan performance data indicate result in a lower risk of default."

The letter was sent to the heads of the Office of Comptroller of the Currency, the Federal Deposit Insurance Corporation, Department of Housing and Urban Affairs, The Federal Reserve, the Securities and Exchange Commission, and the CFPB.

The Coalition's membership is composed of national and state associations representing banking, real estate, title, building, consumer, and other interest groups.