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Lawmakers, Groups Challenge QRM Rule

On Wednesday members of Congress linked arms with a broad coalition of community and professional associations to call for the reversal of a key provision in the Dodd-Frank Act, which critics charge will upend recovery in the housing markets, close the door on new homebuyers, and force borrowers to shoulder higher costs.


Sens. Kay Hagan (D-North Carolina) and Mary Landrieu (D-Louisiana) gathered with Reps. John Campbell (R-California) and Brad Sherman (D-California) under the umbrella of the Coalition for Sensible Housing Policy (CSHP) at a press conference to champion the redefinition of the controversial Qualified Residential Mortgage (QRM) rule.

In a statement, Hagan called the rule and other stipulations ""strict, inflexible restrictions proposed by banking regulators [that could] put home ownership out of reach for many creditworthy American families,"" adding that ""the proposed rule runs counter to the commonsense, bipartisan provision"" that she and other senators wrote into the Dodd-Frank Act.

""We are urging regulators to go back to the drafting table,"" she said.

Proposed by U.S. regulatory authorities as part of the risk-retention rule this year, the QRM definition exempts banks from a 5 percent risk-retention stipulation on the condition that the loans packaged and sold as securities meet certain criteria.


Under the proposed criteria, regulators will determine exemptions by calculating a loan-to-risk ratio that records a 20 percent down payment in some cases and 10 percent in others.

Regulators decided to ""extend"":https://themreport.com/articles/mortgage-bankers-praises-dodd-frank-comment-extension-2011-06-08 the official commentary period and delay ratification of the rule after an outcry from the banking and mortgage industries this month.

Representing 320 members of Congress and over 40 civil society organizations, supporters planned Wednesday's conference around a ""white paper"":http://www.aba.com/aba/documents/press/CoalitionforSensibleHousingPolicy-QRMWhitePaper.pdf that CSHP plans to submit as commentary.

""Regulators have drafted proposed [QRM] rules that upset the important balance contemplated by Congress,"" CSHP said in the paper. ""Rather than creating a system of penalties to discourage bad lending [and] incentives for appropriate lending, regulators have developed a rule that is too narrowly drawn.""

Authored in part by partnering organizations, including the ""American Bankers Association"":http://www.aba.com/default.htm (ABA), ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm (MBA), and ""National Fair Housing Alliance"":http://www.nationalfairhousing.org/, the paper argued that the QRM rule would ultimately harm homeowners by upping down payments from 5 percent to 20 percent, making families save more, postpone homeownership, and meet rigorous eligibility criteria.

Industry leaders and national associations stood alongside lawmakers calling for change on Wednesday.

""The proposed QRM goes too far in restricting credit, which will harm borrowers and the nation's fledgling economic recovery,"" said Frank Keating, president and CEO of the ""ABA"":http://www.aba.com/default.htm. ""We stand as part of [CSHP] in seeking a revision of this ill-conceived proposal.""

Regulatory agencies, including the ""Federal Reserve"":http://www.federalreserve.gov/, ""Office of the Comptroller for the Currency"":http://www.occ.treas.gov/, and ""FDIC"":http://www.fdic.gov/, will allow commentary for the proposed QRM rule until August 1.

About Author: Ryan Schuette

Ryan Schuette is a journalist, cartoonist, and social entrepreneur with several years of experience in real-estate news, international reporting, and business management. He currently lives in the Washington, D.C., area, where he freelances for DS News and MReport.

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