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Published by Foreclosure Fraud

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Published by: Foreclosure Fraud on Jul 11, 2012
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July 9, 2012Monica JacksonOffice of the Executive SecretaryBureau of Consumer Financial Protection1700 G Street, NWWashington, DC 20552Re: Docket No. CFPB-2012-0022 or RIN 3170-AA17Dear Ms. Jackson:The Mortgage Bankers Association (MBA)
welcomes the decision of the Bureau ofConsumer Financial Protection (CFPB or Bureau) to reopen the comment period for itsproposed rule amending Regulation Z and the accompanying Staff Commentary(commentary) to implement the Ability to Repay/Qualified Mortgage (QM) provisions ofthe Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. MBAuniquely represents mortgage lenders of all sizes, from federally-chartered institutionsto the smallest community lenders, who serve the mortgage financing needs of familiesand neighborhoods throughout the nation.MBA believes the Ability to Repay/QM rule (hereinafter QM rule) is the most significantrule required by Dodd-Frank affecting mortgage lending. How it is finalized — what itcontains and how it is structured — will determine how many consumers have access tosafe, affordable and sustainable mortgage credit for generations to come.This letter responds to the particular questions raised. Nevertheless, we believe theBureau has sufficient latitude under Dodd-Frank to create a rule that does allow riskyloans and at the same time does not stem sound credit and unduly regulateunderwriting. We are working an approach to Ability to Repay/QM rule that will notharm consumers and undermine the economic recovery. We look forward to sharing itwith the Bureau.
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry,an industry that employs more than 280,000 people in virtually every community in the country. Headquartered inWashington, D.C., the association works to ensure the continued strength of the nation's residential and commercialreal estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBApromotes fair and ethical lending practices and fosters professional excellence among real estate financeemployees through a wide range of educational programs and a variety of publications. Its membership of over2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercialbanks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additionalinformation, visit MBA's Web site:www.mortgagebankers.org. 
MBA Comment on Reopened Comment Period for QM RuleJuly 9, 2012Page 2
27Notably, this rulemaking proceeds as lenders are continuing to tighten credit over the2011 book of business, which was already tighter than we have seen in years. Accessto credit is taking on some disturbing characteristics that will have long term impacts ifnot addressed. Without lending, the economy will not recover, especially for the middleand lower middle class who buy starter homes and lower sales price homes.As Federal Reserve Chairman Ben Bernanke observed:“One reason for the very slow recovery in mortgage credit, despitemonetary policy actions that have helped drive mortgage rates tohistorically low levels, is that many lending institutions have tightenedunderwriting conditions dramatically, relative to the pre-recession period.Given the lax standards during the credit boom, some tightening wasdoubtless appropriate to protect consumers and ensure lenders' safetyand soundness. However, current lending practices appear to reflect, inpart, obstacles that are limiting or preventing lending even to creditworthyhouseholds.”
 Secretary of Housing and Urban Development Shaun Donovan has said he believesthat in today's market 10-20 percent of potential home buyers who could adequatelycarry the debt were being "locked out" of the market because credit was either notavailable or was available only at a restrictive price. He observed:
“We had risk-amnesia going into the crisis and I think now we’ve gone abit too far in the other direction,” he said.
Even though the mortgage industry has implemented some of the most conservativeunderwriting standards in decades and toxic mortgage products are no longer available,we understand the value of embedding sound product and underwriting standards intothe law to ensure consumers are protected going forward. But the standards must beestablished so they provide the right balance between consumer protection and accessto credit. Establishing an ability to repay requirement, along with an unambiguous set ofstandards in the form of a clear QM rule, is the right way to accomplish this.If this rule is not done correctly, the impact will be worse on the very borrowers we aretrying to protect and hinder the availability of credit for far too many qualified borrowers.We may very well end up with a far more restrictive lending environment than we havetoday and, at the same time, harm the economy for years to come.
Speech before the National Association of Home Builders, Orlando, FL, 2/10/12
As quoted in Reuters, 5/10/12
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

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