MBA Comment on Reopened Comment Period for QM RuleJuly 9, 2012Page 3
27For this reason, we do not believe there can be too much deliberation on this rule. It isabsolutely essential that it carries out its purpose without unwittingly undermining theavailability and affordability of credit and the nation's economic recovery.In reopening the comment period, the Bureau specifically seeks comment on: (1) datareceived by the CFPB from the Historical Loan Performance (HLP) dataset of theFederal Housing Finance Agency (FHFA) regarding loan performance by year and debt-to-income (DTI) range as well as data from other data sets relevant to loanperformance; and (2) estimates of litigation costs and legal liability risks associated withclaims alleging a violation of ability-to-repay requirements for a mortgage loan that is a“not qualified mortgage” versus a “qualified mortgage.”In this letter, MBA supplements its July 22, 2011, comment letter as well as othercomments provided to the Bureau and respectfully offers (1) a summary of key points inour responses to the questions raised by the Bureau; (2) our responses to the questionsthemselves and (3) the principles MBA supports to finalize the rule going forward.
I. Summary of Key Points in Responses
- The responses provide significant detail.The following summarizes the key points.
A. Comments on FHFA and Related Data
Our original July 21, 2011, comment letter suggested that the QM could requirecompliance and evidence of compliance with widely accepted underwritingstandards such as Fannie Mae’s Desktop Underwriter
(DU) and Freddie Mac’sLoan Prospector
(LP). However, a mechanism must also be established toapprove current and future standards available from sources other than theGovernment Sponsored Enterprises. We still believe incorporating thesestandards including the use of automated underwriting systems, with clear,objective and specific standards regarding their use, offers a sound alternativethat has the virtue of assuring that the standards for the QM are dynamic andresponsive as understanding of mortgage performance and the ability to repaydeepens.
The other approach that has been offered would involve embedding objective,numerical standards in the definition such as a particular DTI and a “waterfall” ofalternative criteria. In March 2012, some lenders and consumer groups met withthe CFPB and proposed a maximum total-debt-to-income ratio (TDTI) of 43percent that, if not met, could be satisfied through a waterfall.
While we appreciate these efforts to establish clear standards for the safe harborand bound the issues before the court, the 43 percent TDTI, which would ensurea loan is regarded as a QM, is a problem. Using the Federal Housing FinanceAgency (FHFA) data, from 1997-2009, 23 percent of the loans acquired by the