NAR: Don’t choke market with QM regulations

he National Association of Realtors (NAR) urged a U.S. House subcommittee to create a broadly defined Qualified Mortgage (QM) regulation.

By law, Congress must define a “qualified mortgage” that protects consumers. The QM regulation is designed to ensure that lenders only make loans to borrowers who have the ability to repay the loan.

If Congress narrowly defines a QM, it could threaten the burgeoning housing recovery by denying creditworthy borrowers access to safe, quality loan products, said NAR’s 2012 Vice President and Liaison to Government Affairs Scott Louser in testimony yesterday before the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit.

“Realtors are the leading advocate for housing issues and believe that one of the greatest issues affecting the housing market is uncertainty in the rules that govern housing finance,” Louser said. “The first step to creating certainty in the housing finance system is to broadly define QM so that it encompasses the vast majority of the safe, high-quality lending being done today.”

In his testimony, Louser said that current underwriting standards have already slowed the housing market recovery and narrowly defining a QM could make it worse. It could also force more borrowers into the non-QM market, which could threaten lenders and investors with steering or ability-to-pay violations. That lending atmosphere could lead to higher-cost mortgage loans for everyone.

“Creating a broad QM that establishes strong consumer protections, promotes mortgage liquidity, incorporates important ability-to-repay standards and offers lenders a safe harbor … benefits lenders, investors and consumers,” said Louser.

Louser testified that another area of concern to Realtors is the definition of points and fees in the QM provision, which limits the total points and fees collected by lenders and their affiliates to 3 percent of the loan amount. He said this discriminates against real estate and mortgage firms with affiliates involved in the transaction and limits companies from offering full services to clients.

NAR urged Congress to pass H.R. 4323, the “Consumer Mortgage Choice Act,” so that consumers can benefit from greater competition between affiliated and unaffiliated mortgage lenders.