CFPB should remove DTI requirement, income verification rules for QM

September 16, 2019

The Consumer Financial Protection Bureau (CFPB) should take special note of the challenges faced by credit unions and other smaller mortgage lenders in the absence of certain expansions of the Qualified Mortgage safe harbor, CUNA wrote to the CFPB Monday.

The letter comes in response to a CFPB advance notice of proposed rulemaking on whether to propose revisions to the definition of a QM in light of the planned January 2021 expiration of a category of QM eligible for purchase by Fannie Mae and Freddie Mac, the Temporary GSE QM, or the “GSE patch.”

“Specifically, we urge the Bureau to couple any expiration or limited extension of the GSE patch with a revision to the overall ability-to-repay regulations that would eliminate: 1) the 43% debt-to-income ratio; and 2) the Appendix Q income verification rules as prerequisites for a mortgage loan to satisfy the requirements of the safe harbor created by the QM definition,” the letter reads. “Each of these actions of essential to preserving access to affordable mortgage credit for million of credit union members and ensuring the smooth and orderly transition of the secondary mortgage market.”

The letter notes that the GSE patch “has played a critical role” in ensuring access to affordable mortgage credit for credit union members, many of whom are traditionally underserved by the financial services marketplace. 

Eliminating the GSE parch would “severely hamper credit unions’ ability to fulfill their specified mission in the mortgage market.”

CUNA’s Monday letter follows up a letter sent last week by CUNA and other financial trade organizations emphasizing similar concerns.