WASHINGTON – Yesterday, the Consumer Financial Protection Bureau (CFPB) posted its standards to define a "qualified mortgage (QM)" under the agency's "ability to repay" rules to the bureau's Web site.
As indicated to CUNA President/CEO Bill Cheney in a Wednesday phone call from CFPB Director Richard Cordray, the CFPB has taken steps to address various CUNA concerns, including legal protection from challenges for noncompliance with qualified mortgage standards.
"We support the agency's steps to minimize disruptions in the availability of mortgage credit for consumers," said Cheney Thursday. "CUNA strongly supported a 'safe harbor' approach for QM loans that would provide the maximum legal protection to credit unions under the 'ability to repay’ rule."
Cheney added that the approach taken by the bureau "should provide legal certainty to lenders such as credit unions.
CUNA has created a summary of the final rules with credit union perspective, which is available here.
Congress directed that the ability to repay rules include provisions that would help shield lenders whose loans meet QM standards if challenged in court by a borrower alleging the loan is not in compliance. The new CFPB rules take a dual approach to higher-priced loans and lower-priced ones regarding legal protection.
For lower-priced loans, the CFPB rule creates a "safe harbor" status for lenders. These prime loans generally are made to consumers who are considered to be lower risk borrowers.
It is anticipated that most credit union mortgage loans would qualify for the safe harbor status, an outcome that CUNA has aggressively pursued. Consumers may challenge their loan under the new rule if they feel the loan does not meet the definition of a Qualified Mortgage, but the safe harbor is intended to provide lenders with legal protection that QM standards have been met.
The CFPB’s release is available here.