WASHINGTON (1/10/14)--Today may not look a lot different than yesterday to many people, but for mortgage lending credit unions and thousands of other lenders today is the day that the Ability-to-Repay(ATR)/ Qualified Mortgage (QM) lending rules go into effect.
The rule covers consumer closed-end mortgage loans including home-purchase loans, refinances, and home equity loans secured by the borrower's dwelling. The Credit Union National Association is reminding credit unions of the many compliance resource materials that have been provided over the past year.
For borrowers, the new Consumer Financial Protection Bureau rules were written as protections and in response to abusive lending practices that helped undermine the country's housing market and economy. Credit unions largely did not engage in such lending practices and have been recognized throughout the housing crisis as being a model for responsible lending.
The rule requires credit unions and others to assess a member's ability to repay based on specific criteria such as current or reasonably expected income or assets, credit history, employment status, current debt and other related factors that credit unions routinely consider when originating a loan.
Lenders that write mortgages that meet QM criteria, such as requiring a borrower to have a DTI of no more than 43%, are intended to be able to avoid legal liability if their compliance with the ATR provisions is challenged in court. However, there is no requirement that all mortgages have to meet the QM provisions.
In fact, CFPB Director Richard Cordray and the National Credit Union Administration have made it very clear that credit unions and other lending institutions are not required to originate QMs only and may originate non-QM loans. CUNA urged the regulators to clarify that credit unions and other lenders can decide whether a mortgage they originate should confirm to the QM standards or not, as long as the ATR requirements are met.
CUNA reminds CUs of the following support offered by CUNA or issued by federal regulators. (Use resource links to access the documents.):
A comprehensive CUNA.org page of CFPB mortgage rule compliance resources that provides a one-stop shop to assist credit unions;
A National Credit Union Administration supervisory letter to credit unions (14-CU-01) that notes agency field staff "will take into account a credit union's good-faith efforts to comply" with new QM regulations as they conduct their early-stage examinations; and
A CFPB page of regulatory guidance that provides quick reference charts, videos, compliance guides, supervision and examination materials and other resources.