Credit Unions: CFPB QM Rule Will Make it Harder for Americans to Buy Homes

The House Financial Services Subcommittee on Financial Institutions this week heard testimony from the credit union movement during a hearing titled, “Examining How the Dodd-Frank Act Hampers Home Ownership.”

Carrying the flag for credit unions was Jerry Reed, Chief Lending Officer at Alaska USA Federal Credit Union. He testified that credit unions worry the Consumer Financial Protection Bureau’s (CFPB) Qualified Mortgage (QM) rule will make it difficult if not impossible for credit unions to write non-QM loans. Reed testified the new QM Rule essentially restructures underwriting standards for people who are in fact creditworthy.

Reed told subcommittee members the QM rule may have the unintended consequence of reducing credit union members’ access to credit.

Credit unions are advocating for permanent ability to sell non-QM loans to Fannie Mae and Freddie Mac. The feds announced earlier this year the two GSEs will not purchase non QM loans when the new rules take effect.

Beginning January 10, 2014, Fannie Mae and Freddie Mac will no longer purchase a loan that is subject to the “ability to repay” rule if the loan:

  • is not fully amortizing,
  • has a term of longer than 30 years, or
  • includes points and fees in excess of three percent of the total loan amount, or such other limits for low balance loans as set forth in the rule.

Mortgages recently granted to Northwest consumers may not have happened had the QM Rule been in effect. John Trull, director of regulatory advocacy for the Northwest Credit Union Association (NWCUA) noted as an example that as of May of this year, one Oregon Credit Union had originated 67 mortgage loans for $12.4 million dollars.

“Fourteen percent, or 11 of those loans do not meet the new definition of a qualified mortgage. Eight of the loans would not be qualified mortgages because of the new debt to income ratio set at 43%. However, those loans are still qualified mortgages when sold to GSE’s under the temporary exemption,” Trull said.

The credit union Trull referenced currently qualifies borrowers with a debt to income ratio of 45%. As a small credit union they sell the loans they originate to Fannie Mae.

“Three of the 67 home loans that they originated through May would no longer be eligible for purchase by Fannie Mae beginning January 10, 2014,” said Trull. “That means they might not have made those loans, and that the members who could have afforded those homes might have to go elsewhere and pay a higher interest rate, to fulfill their dream of owning a home”

 

Questions? Contact Lynn Heider: 503.350.2225, lheider@nwcua.org.

Posted in Around the NW, NWCUA.