Sunday, May 6, 2012

CFPB Works To Finalize Dodd-Frank Regs' Definition Of "Qualified Mortgage"; Bankster Violations To Lead To Harsh Liability

American Banker reports:

  • The Consumer Financial Protection Bureau is working to finalize the definition of a Qualified Mortgage ["QM"] under the forthcoming ability-to-pay regulations. These regulations will have profound implications for the entire U.S. residential mortgage market.
  • Under the Dodd Frank Act, the liability for violating the ability-to-repay standard is intended to be harsh. The law provides borrowers and their counsel a strong arsenal to stop foreclosure, obtain substantial compensation, and cover the attorney's fees. Adding such a significant element of legal risk to every underwriting decision a lender makes, and to every loan an investor buys, has the potential to drive capital away from the mortgage market.

  • Recognizing this, Congress created the QM and granted legal protections to lenders making these loans in order to establish QMs as the "preferred" product in the market. Under this incentive structure, borrowers would seek out QMs, and lenders would make them widely available; conversely, lenders that originate non-QMs would be subject to significantly enhanced legal risks.

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