Welcome to Scribd, the world's digital library. Read, publish, and share books and documents. See more
Download
Standard view
Full view
of .
Save to My Library
Look up keyword
Like this
1Activity
0 of .
Results for:
No results containing your search query
P. 1
Letter to Director Richard Cordray Re: Ability‐to‐Repay Proposed Rule, Docket No. R‐1417 and RIN No. 7100‐AD75

Letter to Director Richard Cordray Re: Ability‐to‐Repay Proposed Rule, Docket No. R‐1417 and RIN No. 7100‐AD75

Ratings: (0)|Views: 115 |Likes:
Published by Business Roundtable
BRT Letter to Director Richard Cordray Re: Ability‐to‐Repay Proposed Rule, Docket No. R‐1417 and RIN No. 7100‐AD75
BRT Letter to Director Richard Cordray Re: Ability‐to‐Repay Proposed Rule, Docket No. R‐1417 and RIN No. 7100‐AD75

More info:

Published by: Business Roundtable on Nov 08, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

05/13/2014

pdf

text

original

 
 
300 New Jersey Avenue, NWTelephone202.872.1260Suite 800Facsimile202.466.3509Washington, DC 20001Websitebrt.org
November
 
2,
 
2012
 
The
 
Honorable
 
Richard
 
Cordray
 
Director
 
Bureau
 
of 
 
Consumer
 
Financial
 
Protection
 
1700
 
G
 
St.,
 
NW
 
Washington,
 
DC
 
20552
 
Re:
 
Ability
to
Repay
 
Proposed
 
Rule,
 
Docket
 
No.
 
R
1417
 
and
 
RIN
 
No.
 
7100
AD75
 
Dear
 
Director
 
Cordray:
 
The
 
Business
 
Roundtable
 
(“BRT”)
 
is
 
an
 
association
 
of 
 
chief 
 
executive
 
officers
 
of 
 
leading
 
U.S.
 
companies
 
with
 
more
 
than
 
$7.3
 
trillion
 
in
 
annual
 
revenues
 
and
 
nearly
 
16
 
million
 
employees.
 
Although
 
the
 
formal
 
comment
 
period
 
for
 
the
 
proposed
 
rule
 
has
 
ended,
1
 
we
 
nonetheless
 
write
 
to
 
share
 
our
 
views
 
on
 
the
 
definition
 
of 
 
“Qualified
 
Mortgage”
 
(QM)
 
in
 
the
 
forthcoming
 
“ability
to
repay”
 
final
 
rule.
 
In
 
this
 
regard,
 
we
 
wish
 
to
 
share
 
the
 
combined
 
perspectives
 
of 
 
CEOs
 
at
 
key
 
companies
 
because,
 
as
 
proposed,
 
the
 
new
 
mandate
 
would
 
apply
 
to
 
all
 
mortgage
 
transactions
 
going
 
forward
 
(beginning
 
in
 
January
 
2013)
 
and
 
would
 
have
 
a
 
substantial
 
impact
 
on
 
mortgage
 
underwriting
 
and
 
credit
 
availability.
 
Accordingly,
 
our
 
members
 
 
which
 
represent
 
all
 
sectors
 
of 
 
the
 
U.S.
 
economy
 
 
have
 
a
 
tremendous
 
interest
 
in
 
ensuring
 
that
 
consumers
 
have
 
access
 
to
 
affordable
 
credit,
 
which
 
supports
 
both
 
a
 
robust
 
housing
 
recovery
 
and
 
overall
 
economic
 
growth.
 
Specifically,
 
we
 
urge
 
the
 
Consumer
 
Financial
 
Protection
 
Bureau
 
(“CFPB”)
 
to
 
issue
 
a
 
final
 
rule
 
that
 
includes
 
the
 
following:
 
(1)
 
a
 
broad
 
definition
 
of 
 
the
 
term
 
“Qualified
 
Mortgage”
 
with
 
objective,
 
bright
line
 
underwriting
 
standards;
 
(2)
 
a
 
stronger
 
safe
 
harbor
 
for
 
such
 
mortgages;
 
(3)
 
a
 
reinstatement
 
of 
 
the
 
affiliate
 
exemption
 
from
 
points
 
and
 
fees;
 
and
 
(4)
 
harmonization
 
of 
 
the
 
QM
 
definition
 
with
 
the
 
Qualified
 
Residential
 
Mortgages
 
(QRM)
 
definition.
 
Moreover,
 
these
 
policies
 
should
 
be
 
coordinated
 
with
 
other
 
related
 
mandates,
 
reforms
 
and
 
programs
 
that—when
 
combined—will
 
greatly
 
impact
 
credit
 
availability
 
and
 
costs,
 
as
 
well
 
as
 
the
 
future
 
of 
 
housing
 
finance.
 
BRT
 
members
 
believe
 
that
 
the
 
“ability
to
repay”
 
final
 
rule
 
must
 
be
 
precisely
 
calibrated
 
to
 
protect
 
consumers
 
from
 
irresponsible
 
lending
 
while
 
avoiding
 
serious
 
disruptions
 
in
 
mortgage
 
credit,
 
particularly
 
for
 
certain
 
borrowers
 
and
 
underserved
 
communities.
 
Although
 
many
 
economists
 
see
 
some
 
communities
 
recovery
 
in
 
the
 
1
 
On
 
May
 
11,
 
2011,
 
the
 
Federal
 
Reserve
 
Board
 
issued
 
a
 
proposed
 
rule
 
to
 
implement
 
the
 
ability
 
to
 
repay
 
requirements
 
for
 
residential
 
loans
 
as
 
mandated
 
by
 
Sections
 
1411,
 
1412
 
and
 
portions
 
of 
 
1414
 
of 
 
the
 
Dodd
Frank
 
Act.
 
Under
 
the
 
Dodd
Frank
 
Act,
 
 jurisdiction
 
over
 
the
 
proposed
 
rule
 
was
 
transferred
 
to
 
the
 
CFPB,
 
which
 
re
opened
 
the
 
comment
 
period
 
until
 
July
 
9,
 
2012.
 
Chairman
W. James McNerney, Jr.The Boeing Company
President
John EnglerBusiness Roundtable
Executive Committee 
Ajay BangaMasterCard IncorporatedUrsula M. BurnsXerox CorporationKenneth I. ChenaultAmerican Express CompanyDavid M. CoteHoneywell International, Inc.Alexander M. CutlerEaton CorporationJames DimonJPMorgan Chase & Co.Michael T. DukeWal-Mart Stores, Inc.Jeffrey R. ImmeltGeneral Electric CompanyAndrew N. LiverisThe Dow Chemical CompanyGary W. LovemanCaesars Entertainment CorporationRobert A. McDonaldThe Procter & Gamble CompanyHarold McGraw IIIThe McGraw-Hill CompaniesDouglas R. OberhelmanCaterpillar Inc.Edward B. Rust, Jr.State Farm Insurance CompaniesRandall L. StephensonAT&T Inc.Rex W. TillersonExxon Mobil Corporation
 
The
 
Honorable
 
Richard
 
Cordray
 
November
 
2,
 
2012
 
2
 
housing
 
market,
 
lending
 
is
 
still
 
largely
 
restrained.
 
The
 
Dodd
Frank
 
Wall
 
Street
 
Reform
 
and
 
Consumer
 
Protection
 
Act
 
(the
 
“Dodd
Frank
 
Act”),
 
together
 
with
 
the
 
proposed
 
rule,
 
present
 
CFPB
 
with
 
an
 
opportunity
 
to
 
help
 
facilitate
 
a
 
stable
 
mortgage
 
finance
 
market.
 
Conversely,
 
a
 
narrow
 
or
 
ambiguous
 
QM
 
definition
 
without
 
a
 
safe
 
harbor
 
rule,
 
and
 
with
 
a
 
points
 
and
 
fees
 
cap
 
that
 
includes
 
affiliate
 
fees,
 
could
 
further
 
undermine
 
the
 
housing
 
and
 
mortgage
 
markets
 
to
 
the
 
detriment
 
of 
 
consumers
 
and
 
threaten
 
the
 
nation’s
 
economic
 
recovery.
 
We
 
offer
 
the
 
following
 
principles
 
to
 
ensure
 
credit
 
availability
 
for
 
qualified
 
borrowers,
 
instill
 
confidence,
 
and
 
ultimately,
 
help
 
restore
 
the
 
market:
 
I.
 
Principles
 
to
 
Inform
 
the
 
Ability
to
Repay
 
Rule
 
1)
 
The
 
Qualified
 
Mortgage
 
definition
 
should
 
be
 
broadly
 
defined
 
to
 
ensure
 
credit
 
availability.
 
The
 
first
 
step
 
in
 
restoring
 
the
 
housing
 
market
 
to
 
full
 
health
 
is
 
to
 
provide
 
certainty
 
and
 
consistency
 
for
 
all
 
participants.
 
As
 
you
 
know,
 
the
 
Dodd
Frank
 
Act
 
establishes
 
the
 
QM
 
as
 
a
 
standard
 
by
 
which
 
a
 
creditor
 
may
 
presume
 
a
 
borrower’s
 
ability
 
to
 
repay.
 
As
 
a
 
practical
 
matter,
 
lending
 
outside
 
the
 
QM
 
context
 
will
 
be
 
severely
 
constrained,
 
as
 
any
 
violation
 
could
 
bring
 
liability
 
to
 
lenders
 
and 
 
also
 
repel
 
investors
 
that
 
provide
 
capital
 
to
 
fund
 
the
 
$9.7
 
trillion
 
mortgage
 
market
 
and
 
support
 
the
 
$16.4
 
trillion
 
real
 
estate
 
market.
 
Accordingly,
 
the
 
definition
 
of 
 
QM
 
should
 
encompass
 
the
 
vast
 
majority
 
of 
 
safe,
 
high
 
quality
 
lending
 
being
 
done
 
today.
 
Objective,
 
bright
line
 
underwriting
 
standards
 
could
 
be
 
determined
 
using
 
widely
 
accepted,
 
existing
 
standards
 
such
 
as
 
Fannie
 
Mae’s
 
Desktop
 
Underwriter,
 
Freddie
 
Mac’s
 
Loan
 
Prospector,
 
or
 
the
 
Federal
 
Housing
 
Administration’s
 
Handbook
 
on
 
Mortgage
 
Credit
 
Analysis
 
for
 
Mortgage
 
Insurance
 
on
 
One
to
Four
 
Unit
 
Mortgage
 
Loans.
 
Certainty
 
will
 
reduce
 
compliance
 
costs
 
and
 
litigation
 
risk,
 
allowing
 
lenders
 
to
 
provide
 
loans
 
to
 
consumers
 
at
 
lower
 
costs
 
than
 
they
 
could
 
if 
 
the
 
rules
 
were
 
ambiguous
 
and
 
the
 
QM
 
definition
 
included
 
only
 
a
 
narrow
 
class
 
of 
 
mortgages.
 
2)
 
The
 
final
 
rule
 
should
 
include
 
a
 
full
 
safe
 
harbor
 
that
 
provides
 
legal
 
certainty
 
to
 
consumers,
 
lenders
 
and
 
investors.
 
The
 
proposed
 
rule
 
sets
 
forth
 
two
 
alternatives
 
for
 
affording
 
legal
 
protections
 
to
 
lenders
 
and
 
purchasers
 
pursuant
 
to
 
the
 
QM
 
provisions:
 
(1)
 
safe
 
harbor
 
protection;
 
and
 
(2)
 
a
 
rebuttable
 
presumption
 
of 
 
compliance
 
with
 
the
 
“ability
to
repay”
 
requirements.
 
BRT
 
believes
 
CFPB
 
should
 
adopt
 
and
 
strengthen
 
the
 
safe
 
harbor
 
protection
 
alternative.
 
The
 
practical
 
effects
 
of 
 
the
 
two
 
alternatives
 
differ
 
significantly.
 
A
 
rebuttable
 
presumption
 
would
 
invite
 
uncertainty
 
by
 
allowing
 
for
 
the
 
introduction
 
of 
 
evidence
 
and
 
argument,
 
including
 
about
 
standards
 
or
 
factors
 
not
 
explicitly
 
listed
 
in
 
the
 
statute
 
or
 
regulation.
 
Although
 
a
 
lender
 
could
 
establish
 
that
 
its
 
conduct
 
met
 
the
 
presumption
 
under
 
the
 
test
 
provided,
 
another
 
party
 
could
 
attempt
 
to
 
show
 
that
 
the
 
presumption
 
should
 
be
 
overridden
 
by
 
reference
 
to
 
some
 
other
 
set
 
of 
 
facts,
 
additional
 
evidence,
 
or
 
policy
 
considerations.
 
The
 
level
 
of 
 
proof 
 
that
 
courts
 
require
 
will
 
inevitably
 
vary,
 
and
 
the
 
 judicial
 
disarray
 
in
 
the
 
application
 
of 
 
a
 
rebuttable
 
presumption
 
standard
 
would
 
leave
 
lenders
 
and
 
secondary
 
market
 
participants
 
with
 
significant
 
uncertainty
 
about
 
what
 
actions
 
are
 
needed
 
to
 
avoid
 
costly
 
litigation.
 
The
 
 
The
 
Honorable
 
Richard
 
Cordray
 
November
 
2,
 
2012
 
3
 
result
 
of 
 
such
 
uncertainty
 
would
 
be
 
less
 
credit
 
available
 
to
 
otherwise
 
creditworthy,
 
moderate
income
 
borrowers.
 
Such
 
a
 
result
 
would
 
stand
 
in
 
stark
 
contrast
 
to
 
what
 
Congress
 
intended
 
in
 
passing
 
the
 
Dodd
 
Frank
 
Act.
 
Conversely,
 
a
 
safe
 
harbor
 
would
 
afford
 
protection
 
from
 
liability
 
through
 
a
 
test
 
that
 
could
 
be
 
followed
 
and
 
relied
upon
 
and
 
thus
 
provide
 
certainty
 
necessary
 
for
 
an
 
efficient
 
and
 
well
functioning
 
housing
 
market.
 
A
 
safe
 
harbor
 
should
 
include
 
the
 
general
 
“ability
to
repay”
 
criteria
 
in
 
the
 
form
 
of 
 
objective,
 
bright
line
 
underwriting
 
standards.
 
While
 
the
 
Federal
 
Reserve
 
Board
 
decided
 
not
 
to
 
include
 
consideration
 
of 
 
a
 
borrower’s
 
debt
to
income
 
(DTI)
 
ratio
 
or
 
residual
 
income
 
in
 
the
 
safe
 
harbor
 
proposal,
 
we
 
believe
 
these
 
considerations
 
should
 
be
 
included.
 
The
 
final
 
rule
 
should
 
provide
 
lenders
 
with
 
the
 
discretion
 
to
 
adapt
 
DTI
 
or
 
residual
 
income
 
requirements,
 
based
 
on
 
changing
 
markets,
 
and
 
not
 
impose
 
a
 
rigid
 
standard
 
that
 
arbitrarily
 
excludes
 
creditworthy
 
borrowers.
 
It
 
is
 
crucial
 
that
 
the
 
CFPB
 
grant
 
lenders
 
an
 
unambiguous
 
safe
 
harbor
 
for
 
QM
 
to
 
ensure
 
that
 
responsibly
 
underwritten
 
loans
 
are
 
broadly
 
available
 
to
 
qualified
 
borrowers
 
and
 
that
 
there
 
is
 
a
 
liquid
 
secondary
 
market
 
to
 
help
 
consumers
 
obtain
 
affordable
 
mortgages.
 
3)
 
The
 
final
 
rule
 
should
 
restore
 
the
 
affiliate
 
exemption
 
from
 
points
 
and
 
fees
 
caps.
 
The
 
Dodd
Frank
 
Act
 
provides
 
that
 
a
 
QM
 
cannot
 
carry
 
points
 
and
 
fees
 
that
 
exceed
 
three
 
percent
 
of 
 
the
 
loan
 
amount.
 
Bills
 
that
 
preceded
 
the
 
final
 
legislation
 
excluded
 
certain
 
charges
 
imposed
 
by
 
lenders’
 
affiliates
 
from
 
the
 
definition
 
of 
 
“points
 
and
 
fees.”
 
BRT
 
supports
 
reinstating
 
the
 
affiliate
 
exemption
 
from
 
the
 
points
 
and
 
fees
 
definition.
 
The
 
exemption
 
provides
 
consumer
 
choice
 
and
 
may
 
avoid
 
unintended
 
consequences.
 
Language
 
from
 
H.R.
 
4323,
 
the
 
Consumer
 
Mortgage
 
Choice
 
Act,
 
excludes
 
the
 
affiliated
 
charges.
 
Importantly,
 
since
 
the
 
housing
 
collapse
 
and
 
subsequent
 
economic
 
recession,
 
mortgage
 
financing
 
has
 
become
 
unstable
 
and
 
uncertain.
 
This
 
fragile
 
state
 
makes
 
affiliate
 
relationships
 
even
 
more
 
critical
 
as
 
they
 
establish
 
accountability
 
between
 
the
 
companies,
 
which
 
leads
 
to
 
well
coordinated,
 
efficient
 
transactions
 
that
 
decrease
 
the
 
likelihood
 
of 
 
any
 
“surprises”
 
for
 
the
 
consumer.
 
In
 
addition,
 
the
 
definition
 
of 
 
“points
 
and
 
fees”
 
includes
 
loan
 
originator
 
compensation,
 
including
 
compensation
 
paid
 
to
 
a
 
lender’s
 
employees.
 
Escrows
 
for
 
taxes
 
and
 
insurance
 
also
 
appear
 
to
 
be
 
included
 
in
 
points
 
and
 
fees.
 
Enforcing
 
the
 
three
percent
 
cap,
 
and
 
including
 
charges
 
to
 
affiliated
 
(but
 
not
 
unaffiliated)
 
companies,
 
compensation
 
for
 
originators
 
(including
 
employees),
 
and
 
amounts
 
of 
 
insurance
 
and
 
taxes
 
held
 
in
 
escrow
 
in
 
the
 
“points
 
and
 
fees”
 
definition
 
is
 
likely
 
to
 
exclude
 
more
 
safe
 
loans
 
than
 
risky
 
loans
 
from
 
the
 
QM
 
definition.
 
Excluding
 
sound
 
loans
 
from
 
the
 
QM
 
definition
 
will
 
cost
 
consumers
 
in
 
the
 
long
 
run.
 
4)
 
The
 
regulations
 
should
 
be
 
harmonized
 
and
 
coordinated.
 
BRT
 
believes
 
that
 
the
 
“ability
to
repay”
 
regulations
 
and
 
the
 
QM
 
definition
 
should
 
be
 
harmonized
 
and
 
coordinated
 
with
 
other
 
similar
 
provisions
 
in
 
related
 
regulations
 
and
 
programs.
 
In
 
particular,
 
the
 
proposed
 
rule
 
issued
 
under
 
the
 
Dodd
Frank
 
Act
 
implementing
 
risk
 
retention
 
requirements
 
contains
 
a
 
definition
 
for
 
“Qualified
 
Residential
 
Mortgage.”
 
The
 
two
 
definitions
 
are
 
related
 
in
 
the
 
sense
 
that
 
the
 
Dodd
Frank
 
Act
 
requires
 
the
 
definition
 
of 
 
QRM
 
be
 
no
 
broader
 
than
 
the
 
definition
 
of 
 
QM
 
in
 
the
 
“ability
to
repay”
 
rule.
 

You're Reading a Free Preview

Download
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->