Executives from CUNA and CUNA Mutual Insurance Group are asking more credit unions to comment on ongoing discussions about the definitions of what will be a qualifying residential mortgage, or QRM.
Created by the financial reform law, QRMs will be mortgage loans from which issuers of mortgage-backed securities will not need to retain 5% of their original balance to help guarantee their soundness.
The QRM regulation discussion has not been seen as a broadly credit union issue because credit unions will not be subject, directly, to the QRM rules since they by and large do not issue mortgage backed securities.
Additionally, the NCUA is not one of the agencies formally involved in the QRM definition debate.
But the executives argued strongly in a webinar update about the QRM debate that credit unions should care passionately about how QRMs are defined and should weigh in on the discussion among regulators. The comment period previously was set to close in June, but has since been extended to Aug. 1.
“I think it’s very important for credit unions thinking about QRM to think about it in terms of a secondary mortgage market without a Fannie or Freddie,” said Joel Luebkeman, director of product development for CUNA Mutual Group Mortgage Insurance.
Luebkeman pointed out that while the eventual fates of Fannie Mae and Freddie Mac have yet to be decided, it is certain that they will be remarkably different than they are today and, in their absence, qualifying residential mortgages may wind up playing a very important role.
Luebkeman and other executives sounded alarms about the chances that qualifying residential mortgages might wind up becoming the industry standard for mortgages, the so-called new conforming loans, and that a QRM definition that is too restrictive may wind up hampering credit union abilities to meet their members' mortgage needs or tailor mortgage products to their specific circumstances.