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Quicken Opting Out of Non-QM Lending

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The chief executive officer of Quicken Loans Inc. said the lender has no plans to make loans that aren’t designated as Qualified Mortgages.

Bill Emerson, CEO of the Detroit-based firm, made his comments Tuesday before the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, according to his prepared testimony.

Emerson, who is vice chairman of the Mortgage Bankers Association, was speaking on behalf of the trade group at a hearing entitled, How Prospective and Current Homeowners Will Be Harmed by the CFPB’s Qualified Mortgage Rule.

His presentation left no doubt about what Quicken’s plans are.

“A common question we’ve received and one I want to answer at the outset is whether we plan to write non-QM loans,” Emerson said. “I can tell you categorically that Quicken Loans, like the overwhelming majority of lenders, will not lend outside the boundaries of QM. In fact, even if we wanted to, we wouldn’t be able to make non-QM loans because there is no discernable secondary market for them. The only place these loans can be kept is on a bank’s balance sheet.”

In addition to the illiquidity of non-QM loans, Emerson said that the liability for making such loans is just too great.

He cited potential liability for actual and statutory damages in additional to refunds for finance charges and attorneys fees. He said that there is no statute of limitations on foreclosure claims.

Emerson cited MBA data that indicates protracted litigation for an average loan can exceed the cost of the loan itself.

He said that non-QM lending is likely to be limited to situations where lenders thought they were making a QM loan but made a mistake, jumbo loans from depository institutions to wealthier borrowers, and high-rate loans made by portfolio lenders to riskier borrowers.

He said that if affordable QM loans are to be made to non-wealthy borrowers, then adjustments need to be made to the rule.

Emerson said that the 3 percent cap on points and fees for QM loans is a key obstacle for borrowers on loans between $100,000 and $150,000. Many prospective borrowers for this range are first-time, rural and underserved homebuyers who will be locked out of the market.

He called on the Consumer Financial Protection Bureau to correct the problem created by the fee limitation.

Another problem with the QM rule is that it “picks winners and losers between affiliated and unaffiliated settlement service providers” despite that both are subject to the same regulations. Emerson said that this will harm consumers.

Emerson noted that Quicken’s own affiliation with title insurer Title Source has helped it maintain its No. 1 standing on the JD Power mortgage lender ranking.

He called on the House to quickly pass H.R. 3211, the Mortgage Choice Act.

Also testifying at the hearing was Independent Community Bankers of America Vice Chairman Jack Hartings, who warned that the QM rule has the potential to drive many community banks with fewer resources out of the mortgage market, reduce access to mortgage credit and interfere with the housing recovery.

With community banks accounting for around 20 percent of the U.S. mortgage market, lending will be impacted.

Like Emerson, Hartings warned that smaller loans will be restricted.

He cited three bills introduced by members of the House Financial Services Committee — the Protecting American Taxpayers and Homeowners Act (H.R. 2767), the CLEAR Relief Act (H.R. 1750) and the Portfolio Lending and Mortgage Access Act of 2013 (H.R. 2673) — that would all serve as solutions to the QM dilemma.

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