Tight regulations over the past eight years have impacted mortgage lenders, yet a majority of lenders favor little or no change to the Consumer Financial Protection Bureau’s (CFPB) regulations on Ability to Pay (ATR) or Qualified Mortgage (QR) according to a survey by mortgage advisory firm STRATMOR.
For the survey, STRATMOR asked 120 lenders questions on their ATR/QM implementation experience; the impact of ATR/QM on ongoing loan origination costs; and their attitude towards loosening ATR/QM regulations.
“It is understandable that more lenders than not don’t want to see changes to the ATR/QM rules said Rob Chrisman, Senior Advisor, STRATMOR. “Even elimination of the regulations will likely require costly changes in the processes, systems, and training and lenders will have to spend more time and money to undo what is in place. Lenders are looking for ways to keep the costs down for themselves and the borrower, not add to them.”
Currently, the survey found, lenders estimated that ATR/QM regulations “added $139 per loan to their ongoing origination costs, with $44 of this additional cost recovered from borrowers through additional loan charges and fees.” As a result, lenders absorbed an ongoing origination cost of $95 per loan.
When asked about changing ATR/QM regulations, 62 percent of respondents favored little or no change to ATR regulations, whereas 54 percent preferred little or no change for QM.
Lenders investing more than $750,000 in ATR/QM implementation were 25 to 50 percent more likely to want a significant scale back or elimination of regulations than lenders investing less than $250,000, the survey found.
Most lenders said that they estimated their average investment in implementing ATR/QM regulations at $326,000 with only minor differences between banks and independent lenders. The big differences between lenders came to the fore when origination costs were broken down by lender size.
The survey found that lenders originating more than $5 billion invested $744,000 on ATR/QM regulations, whereas the investment cost came down to $177,000 for lenders originating less than $1billion.
When it came to implementation, lenders had less difficulty implementing ATR regulations than QM, because other underwriting techniques provided a roadmap for ATR processes. The survey found that lenders felt QM processes remained ambiguous leading to more oversight expenses.