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Lawmakers urge flexible mortgage QRM down payments
WASHINGTON (6/23/11)--As federal regulators wrestle with setting the definition of a qualified residential mortgage (QRM)--which under the Dodd-Frank Wall Street Reform Act would be exempt from risk-retention rules--a bi-partisan group of U.S. House and Senate lawmakers urged regulators not to be rigid in setting the rules. At a press conference Wednesday, the lawmakers said a current proposal to require a 20% down payment for a loan to be defined as a QRM would “shut out responsible homebuyers and further cripple the housing market.” Dodd-Frank requires a lender to retain 5% of the credit risk for securitized loans, but allows QRMs to be exempted. A coalition of consumer, housing and business groups, including the Credit Union National Association, appeared on the podium with the House and Senate members to show support for a more flexible down payment requirement. The press conference was called by Sens. Johnny Isakson (R-Ga.), Kay Hagan ( D-N.C.), and Mary Landrieu ( D-La.), Reps. John Campbell ( R-Calif.), and Brad Sherman (D-Calif.). The lawmakers said the proposed 20% down payment required for a qualified residential mortgage would prevent too many borrowers from obtaining loans: It is unduly narrow and would necessarily increase consumer costs and reduce access to affordable credit. “Drawing on my experience over 30 years in the real estate business, I understand the devastating consequences this proposed rule would have on qualified, creditworthy homebuyers and our fragile housing market,” said Isakson told reporters. He added that the proposed rule does not follow legislative intent: “We don’t have a down payment problem in this country, but rather an underwriting problem. I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible.” Earlier this month, a bipartisan group of 39 senators sent a letter urging regulators to expand the proposed exemption from risk-retention rules mandated by the Dodd-Frank Act, and also argued the proposed regulation goes beyond the intent and language of the statute by imposing unnecessarily tight down payment restrictions.


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