WASHINGTON (12/17/13)--A mixture of qualified mortgages (QM) and nonqualified mortgages may be the best approach for financial institutions to ensure loans are still available to creditworthy borrowers that are protected by fair lending laws such as the Equal credit Opportunity Act, Credit Union National Association Deputy General Counsel Mary Dunn told Bloomberg Business News Americas.
The Bloomberg story reported on QM guidance released by the National Credit Union Administration and other federal financial regulators late last week.
In that guidance the regulators said residential mortgage loans will not be subject to safety-and-soundness criticism solely because of their QM or non-QM status. The guidance addresses Ability-to-Repay and QM standards set to go into effect on Jan. 10. (See Dec. 16 News Now story: NCUA, Regulators Release QM Guidance.)
Dunn told Bloomberg that there are many creditworthy borrowers with debt-to-income ratios that exceed the limits proposed in the QM regulations. "You can still demonstrate an ability to repay a loan, but have a debt-to-income ratio that is higher than 43 percent," Dunn said.
"We think that a number of credit unions are looking at how they can make loans that wouldn't qualify as QMs," she added.
She said there is "real concern" among credit unions that if they just make QM loans, "there could be an overall disparate impact on some borrowers."
CUNA has noted the QM rule's 3% limitation on points and fees for a qualified mortgage loan may be problematic for some credit unions, and said the total debt to total monthly income ratio of 43% should be expanded.
CUNA and credit unions have also called on the Consumer Financial Protection Bureau to delay the effective dates of QM regulations and other upcoming mortgage rules, and protect credit unions and other mortgage originators from litigation. CUNA has also sought a one-year mortgage regulation implementation delay.