Friday, June 1, 2012

QM and QRM rules are delayed

by Ethan Handelman, National Housing Conference

The CFPB announced Wednesday that it was reopening a portion of the qualified mortgage (QM) rule for additional comment. The reopening focuses specifically on new mortgage loan performance data that has become available, rather than reopening the entire rule again. The QM rule implements a portion of the Dodd-Frank law designed to limit mortgage origination to loans that the borrower has the ability to repay. The delay means a rule is unlikely to appear until after the election in November.

What does this mean for access to affordable housing?


  • Uncertainty about the QM and other regulations is part of what’s making it hard to get a mortgage right now. Without a final rule, lenders will remain skittish.
  • The qualified residential mortgage rule (QRM) won’t come out until after the QM rule does. QRM, which defines mortgages that can be securitized without the additional cost of the issuer retaining risk, is a subset of the QM, so regulators are likely to wait. QRM also requires six regulators to agree, unlike QM which is coming from a single regulator. See the NHC comment letter on QRM.

It also means regulators are trying to get it right—to craft a standard that makes mortgage credit available broadly but also safely to low- and moderate-income borrowers in all parts of the country—so that we don’t see a repeat of unsafe mortgage products designed to fail. Let’s hope they do get it right.

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