For more than two years, mortgage lenders have been stressing over something called the qualified mortgage (QM), a forthcoming set of lending rules. A recent headline in National Mortgage Professional Magazine proclaimed that “Homeownership is Under Attack.” You would think the sky was falling. But just wait a couple of weeks. It’s about to get even more interesting.
On January 9, 2013, the Consumer Financial Protection Bureau will ‘unveil’ the final definition of the QM rules. It will effectively set the bar for mortgage lending standards in the United States.
Qualified Mortgage Timeline
We are about to enter a new era in consumer lending, the era of the qualified mortgage. But how did we reach this point? Here’s a quick look back:
- July 21, 2010 — The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law. Among other things, the Dodd-Frank Act is designed to “promote the financial stability of the United States by improving accountability and transparency in the financial system [and] protect consumers from abusive financial services practices.”
- July 21, 2011 — The Consumer Financial Protection Bureau (CFPB) begins operation. The CFPB’s creation was mandated by the Dodd-Frank Act. One of the bureau’s first tasks is to develop the final definition of a qualified mortgage, or QM.
- May 31, 2012 — CFPB opens a public comment period to receive input on the new regulations.
- July 9, 2012 — The aforementioned comment period is closed.
- July – Dec 2012 — CFPB considers comments provided by consumers, industry groups, U.S. senators and others. Toward the end of the year, they say they are on schedule to finalize the QM rules by their January 21, 2013 deadline.
- November 11, 2012 — The publishers of the Home Buying Institute launch a not-for-profit website, QualifiedMortgage.org, to serve as a central source of information on QM-related subjects.
- December 28, 2012 — Inside Mortgage Finance reports that “the agency’s Qualified Mortgage rule will be unveiled the evening of January 9” 2013. Lenders hold their breath in the meantime.
So here we are, eagerly awaiting the details of a new rule that could set the bar for mortgage qualification.
Some fear the new rules will constrict the market, limiting mortgage availability to only the most highly qualified applicants. But this may not be the case, after all.
A 2011 study by the U.S. Government Accounting Office (GAO) determined that the QM-related provisions of the Dodd-Frank Act could have minimal impact. According to their report, “most mortgages [originated between 2001 and 2010] would likely have met the individual criteria.”
According to Inside Mortgage Finance, “the Consumer Financial Protection Bureau will write a definition of [QM] that covers about 90 percent of current production, and … could even boost originations.” We will find out soon enough.
New Rules, New Website
The initial proposal for a qualified mortgage created a stream of misinformation and speculation that is still going strong.
This is to be expected. As you can see from the timeline above, the rules existed as a general outline for two years, with few specifics. Nothing gets the rumor mill going like an information void.
We’ve launched a new website to set the record straight on QM. It offers a standardized definition of the qualified mortgage with regular updates.
We encourage readers to submit corrections, additions and other improvements to the site. Visit www.QualifiedMortgage.org to learn more about this subject.