M Report – Tory Barringer
Six federal agencies have issued a notice revising their proposed qualified residential mortgage (QRM) rule that would require lenders to retain risk when selling mortgage-backed securities (MBS). The FDIC, HUD, Federal Housing Finance Agency (FHFA), Office of the Comptroller of the Currency, Federal Reserve, and Securities and Exchange Commission (SEC) jointly released on Wednesday their proposed revision, which was created in consideration of the industry’s response to the original proposal issued in 2011. That proposal required lenders to keep a stake in the loans they sold in which borrowers were spending more than 36 percent of their income on payments and in loans with down payments of less than 20 percent. At the time, critics argued it would create an even more restrictive lending environment.
Under the new proposal, the 36 percent income threshold has been raised to 43 percent, relaxing the exemption standards somewhat. The revised rule also eliminates the down payment requirement, opening up lending for low-income borrowers. The agencies also made adjustments to bring the QRM proposal more in line with the “qualified mortgage” (QM) rule handed down by the Consumer Financial Protection Bureau (CFPB) earlier in the year. The alignment opens up the scope of QRM eligibility, which was originally “limited to closed-end, first-lien mortgages used to purchase or refinance a one-to-four family property, at least one unit of which is the principal dwelling of the borrower.”