What loan products will you be selling next year? Standard, 30-year fixed? 5-1 ARMs? Jumbos?
The question is one that cannot be answered completely until the Consumer Financial Protection Bureau (CFPB) releases its proposed guidelines for the “qualified” mortgages. In the Frank-Dodd law passed this summer, lenders will have to retain five percent of every loan originated, except for those which meet the definition of “qualified residential mortgages” (QRM).
The CFPB is expected to release its initial proposal in January, but the law requires the guidelines to be finalized no later than April 2011. Already the battle lines are being drawn.
At DocuTech, we support the approach taken by the authors of the original amendment requiring a “safe harbor” for qualified loans. Senators Mary Landrieu (D-La.), Kay Hagan, (D-N.C.) and Johnny Isakson, (R-Ga.) are encouraging the CFPB to use industry analysis of the default risks on certain loan products and features in drafting the QRM rules.
The only way to both protect consumers and ensure lenders can meet the market’s needs is with analysis of actual loan performance as a guide to future decisions instead of relying strictly on buzzwords or popular programs.
Origination News reported that, “Based on the Senators’ research of CoreLogic loan data, they identified eight standards that should shape the QRM definition, including full documentation of borrower income and assets; total debt to income ratio of 45 percent or less; and mortgage insurance for loans when the combined LTV is greater than 80 percent.”
The MBA is also pushing the CFPB to consider strictly-defined ARMs, some interest only loans and jumbo loans should also have a place in QRM.
Other groups, including Wells Fargo Bank, are pushing for more narrow exemptions, such as only allowing loans with at least 70 percent LTV. Wells argues that more narrow restrictions would ensure that lenders would be more willing to lend to credit-worthy borrowers outside of the restrictions, where more broad definitions would end any market outside of the QRM.
It is not too late to let your voice be heard. Contact your Senator or Representative, or become involved with grassroots lobbying groups, such as the MBA’s Mortgage Action Alliance.
All of us here at DocuTech are dedicated to keeping you informed of the major developments in our industry. Not only can you rest assured that all documents will meet new rules and regulations, but we are working behind the scenes as well to influence the rules to best represent the needs of the industry and borrowers.