WASHINGTON (9/3/13)--The Credit Union National Association is encouraging interested credit unions to comment on a joint revised proposal on credit risk retention issued this week by federal banking agencies. One aspect of the proposal is key for credit unions--a proposed definition of the term "qualified residential mortgage (QRM)" for purposes of creating an exemption from the risk retention requirements under the Dodd-Frank Act.
While few credit unions likely would be covered as securitizers of asset-backed securities, the proposal is important to credit unions because the secondary market will likely conform to qualified mortgage (QM) and QRM standards, CUNA noted in its request for comment.
CUNA is also concerned that examiners may insist credit unions confine their mortgage loans to QMs and QRMs.
Under the proposed rule, the definition of QRM would be revised to be the same as the Consumer Financial Protection Bureau's definition of a QM. This is a development that CUNA had urged.
Contrary to the original proposal, there would be no loan-to-value, down payment, credit history, mortgage servicing, or appraisal requirements for a mortgage loan to qualify as a QRM. However, home equity lines of credit, reverse mortgages, mortgages secured by timeshares and temporary or "bridge" loans of 12 months or less would not qualify for QRM status.
The proposed rule also differs from the original proposal as QRMs would now include any closed-end loan secured by a dwelling, not just principal dwellings secured by first liens that are securitized. Subordinate liens would also be eligible for QRM status, as long as they meet the CFPB's definition of QM and are securitized.
Importantly, CUNA noted that as part of the re-proposed rule, the agencies are seeking comment on a much more stringent alternative to the proposed QRM definition, termed "QM-Plus" that does address underwriting criteria, such as a 30% down payment.
Comments are due to the agencies on the proposed rule by Oct. 30. CUNA, working with its Consumer Protection Subcommittee,
the Housing Finance Reform Task Force on related policy issues, the CUNA Lending Council, the state credit union leagues and credit unions, will be filing a strong comment letter with the agencies to argue against the alternative QM-Plus definition for QRMs.
Use the resource link for the CUNA Comment Call on the proposed plan.