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Twenty-Four Groups Call on CFPB to Make QM Rule Safer

Twenty-four trade groups and associations signed off on a comment letter Friday that calls on the ""Consumer Financial Protection Bureau"":http://www.consumerfinance.gov/ (CFPB) to give creditors more legal leeway when it comes to Qualified Mortgages.

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The two-page letter ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô headed up by the ""American Bankers Association"":http://www.aba.com/default.htm, ""Mortgage Bankers Association"":http://www.mbaa.org/default.htm, ""National Association of Home Builders"":http://www.nahb.org/, and ""National Association of Realtors"":http://www.realtor.org/, among others ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô framed forthcoming rules around credit availability and sound home loans.

The comment letter targeted provisions that would establish a rebuttable presumption of compliance, describing it as one that ""will force lenders to retreat to far more conservative lending standards"" in a still-nascent recovery.

""Smaller lenders will have great difficulty managing this degree of risk and the resultant litigation costs,"" the undersigned organizations added.

The letter called for the inclusion of a so-called legal safe harbor to reduce the scope of litigation for originators and creditors, portraying it as a rule that would reduce ""groundless claims,"" permit ""lenders of all sizes to compete,"" and allow the ""maximum number of families to qualify

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for traditional, affordable and sustainable loans.""

The fight over amendments to the Qualified Mortgage ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô and what it will ultimately look like under new rules from the CFPB ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô continues from last year, when the ""Federal Reserve"":http://www.federalreserve.gov/ first proposed changes to the ability-to-repay standards under the Truth-in-Lending Act.

Influential trade groups continue to portray the Qualified Mortgage as a credit-limiting rule, while others largely take the side of the consumer, arguing that the absence of legal consequence for creditors would provide for the same conditions that led to the financial crisis.

In a comment letter last July, other organizations ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô including the ""Center for Responsible Lending"":http://www.responsiblelending.org/, ""National Association of Consumer Advocates"":http://www.naca.net/, and ""National Consumer Law Center"":http://www.nclc.org/ ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô billed any safe-harbor provisions as some that would run contrary to the spirit of Dodd-Frank and risk the next recession.

""Dodd-Frank created a finely tuned balance of market incentives and market discipline, and a safe harbor would upset that balance,"" the four organizations said in a separate letter. ""It would once again make it difficult to hold irresponsible parties in the market accountable ├â┬ó├óÔÇÜ┬¼├óÔé¼┼ô thus repeating the mistakes of the past decade.""

The four said that the CFPB ""will certainly be urged to adopt [safe harbor] with threats that access to credit will dry up and the market will continue to stall,"" adding ""[i]t was the absence of regulation and the absence of accountability that let once marginal bad practices become industry wide.

""Reduced accountability will work no better in the next decades than it did in the last,"" the letter said in July.

Since going live with Richard Cordray's recess appointment in January, the CFPB continues to move forward with proposals for new rules. The agency more recently pledged to release proposals to standardize servicing rules this summer.

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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