Speaking to bank and credit union executives attending the Mortgage Bankers Association meeting at the Washington Convention Center on Monday, Cordray took issue with the suggestion that current QM regulations may effectively shrink the numbers of available housing finance loans because so few mortgages funded now will meet requirements that take effect in January.
“Based on the other elements of the QM definition, we estimate that more than 95% of the mortgage loans being made in the current market will be Qualified Mortgages, as Mark Zandi of Moody’s Analytics recently confirmed,” Cordray told the group.
“Some, such as CoreLogic, have put out much lower figures, but by their own admission, those figures were not intended to take account of the expanded definition of QM that will actually take effect in January but instead were offered as projections of a distant future when the temporary expansion expires,” he said.
“Indeed, CoreLogic acknowledges that as long as the temporary expansion remains in effect, which may well be for several years, the impact of the regulations will be minor.”
Cordray's “other elements” of the QM definition include the small issuer exemption to QM rules as well as expanding the definition of a QM loan to include loans eligible for sale to Fannie Mae or Freddie Mac or eligible for insurance from a government agency such as the Federal Housing Administration or Veterans Administration.
The CFPB director also addressed fears that QM loans would not really provide the promised legal safe harbor.
“We purposely drew bright lines to define the contours of a Qualified Mortgage, such as a 43% debt-to-income ratio, or eligibility for purchase by the GSEs while they remain in conservatorship, or portfolio loans made by small creditors,” Cordray said.
“A large number of industry commenters asked for those bright lines, and we agreed that approach made sense,” he said.
“If those lines were not drawn as sharply as they are, then much would have remained to be fought out in the courts for years and years before the definitions were clear. We crafted the rule to avoid that result, which is why critics are now forced to dream up hypothetical factual disputes about whether debts and income were correctly calculated in their efforts to criticize the rules or sow anxiety about them,” Cordray said.