Survey Number 2019-12

The Cooperative Credit Union Association, Inc. is seeking your views on a new notice from the Consumer Financial Protection Bureau regarding the definition of “qualified mortgages” under Regulation Z, Truth-in-Lending Act (TILA) and Ability to Repay (ATR)/Qualified Mortgages (QM) Rules.

The Association participated on a call with the CFPB in July, prior to the publication of the notice in the Federal Register, and was briefed on key aspects of the issues involved, and the Association will be filing a comment letter.  

This survey should take no more than 15 minutes of your time. We would appreciate your response by September 16 so that we may include your concerns in our letter to the agency. Thank you in advance for your participation.

Summary of Proposal
Under TILA, creditors are required to assess a mortgage borrower’s ATR using credit history, income, debt-to-income ratio or residual income, employment status and other factors.

Creditors are presumed to have assessed a borrower’s ATR if the loan and loan process meet QM requirements under Regulation Z. The rule provides categories of QMs, such as general QMs that meet debt-to-income ratio requirements addressed in Appendix Q to the rule and temporary QMs that are eligible for purchase by Fannie Mae or Freddie Mac (GSEs) that may have higher DTI limits than general QM loans.

It is the treatment of the temporary QM-designation that is the focus of the CFPB’s notice, though some other related issues will also be under review by the agency.

The full proposal may be read HERE.

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* Contact Information

1.     The CFPB has determined that it will not make the temporary GSE QM loan designation permanent, which would mean that when the temporary designation lapses in January 2021, loans eligible for sale in the secondary market would have to comply with the full requirements for QM in order to be QM designated, including debt to income requirements.

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* Do you agree that the temporary GSE QM designation should expire in January 2021?

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* If not, should it be made permanent?

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* Should expiration be extended to beyond January 2021?

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* If the temporary GSE QM loan designation is eliminated, what other changes are needed in the ATR rule to minimize market disruptions?

2.     The CFPB is considering whether the definition of a QM should be revised regarding how creditors determine a borrower’s ability to repay.

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* Should the CFPB continue to require a direct measure of a consumer’s personal finances, such as DTI or residual income, in order for a loan to be QM designated?

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* Alternatively, should the CFPB replace or supplement the DTI limit with other methods?

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* If yes, should other measures to determine QM status be addressed, such as allowing loans on creditors’ books to automatically convert to QM status based on facts such as the loans have performed for two years or some other period?

3.      Appendix Q to the CFPB’s ATR rule provides directives on how to calculate and verify income using direct measures.

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* Should the CFPB continue requiring the use of Appendix Q?

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* Should changes to Appendix Q be adopted?  If so, what would you recommend?

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* Should creditors rely on their own measures to determine the borrower’s ability to repay?

4.      Other Related Issues

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* Should creditors be required to consider other risk factors such as credit score or LTV?

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* What are the advantages and disadvantages to borrowers and creditors of using direct methods to measure ability to repay, such as DTI?

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* What are the advantages and disadvantages of using indirect methods to measure ability to repay?

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* Should the CFPB remove the distinction between safe harbor QMs that have an APR no greater than 1.5% above the average prime offer rate and rebuttable presumption QMs that exceed that ratio?

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* How much lead time will creditors need if the CFPB's proposed changes are made to the ATR rule regarding how borrowers are assessed for credit worthiness?

Thank you for completing this survey by September 16, 2019. 
Please contact govaff-reg@ccua.org with any questions. 
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