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QM Legislation Introduced

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Mortgage bankers are throwing their support behind proposed legislation that would modify the definition of a qualified mortgage and open up lending to more prospective borrowers.

In January, the Consumer Financial Protection Bureau issued an ability-to-repay rule, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Residential mortgage lenders can comply with the new rule by issuing qualified mortgages, which the CFPB defined in the announcement.

At the time, the Mortgage Bankers Association expressed concern that the rule would reduce the availability of credit. The trade group warned that the rule was “overly inclusive” because of a 3 percent cap on points and fees and warned that a 150-basis-point spread limit over benchmark rates would adversely impact too many borrowers.

A new bill in Congress aims to address the issues brought up by MBA.

The bipartisan bill, H.R. 1077, was introduced this month into the House by Rep. Bill Huizenga (R-Mich.), according to an announcement Thursday from MBA. Co-sponsors of the bill include David Scott (D-Ga.), Ed Royce (R-Calif.), William Lacy Clay (D-Mo.), Steve Stivers (R-Ohio), Gregory Meeks (D-N.Y.), Spencer Bachus (R-Ala.) and Gary Peters (D-Mich.).

The proposed legislation is being applauded by the association because it would modify the QM definition of points and fees and improve access to affordable mortgage credit for qualified borrowers.

“Under Dodd-Frank, loans that have points and fees in excess of three percent of the loan amount cannot qualify for the qualified mortgage definition that allows lenders to meet the ability to repay test,” MBA stated. “Non-QM loans carry with them greater liability for lenders, and thus will be more expensive or less available for borrowers.”

H.R. 1077 would exclude fees paid to lender-affiliated title entities from the calculation and prevent double counting of loan officer compensation.

It would also clarify that amounts held in escrow accounts for payment of homeowners insurance that are not retained by the lender or its affiliates would be excluded from the calculation.

In addition, lender charges to cover loan-level price adjustments charged by Fannie Mae and Freddie Mac would be excluded from the calculation, as would lender-paid compensation to a correspondent bank or mortgage broker in a wholesale transaction.

“In our review of the final rule, we have identified several concerns with the points and fees calculation that have the potential to limit the choices that borrowers have when selecting a mortgage and increasing the costs of getting those mortgages” MBA Chairman Debra W. Still said in the news release. “This bill goes a long way toward addressing those concerns.”

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