The comment was co-signed by the
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We the undersigned civil rights organizations are writing in response to the
However, as you know, the Patch cannot continue indefinitely because it will cease to function once the
In the proposal, the
We did not oppose the General QM Final Rule that the
The Final Rule's loan feature limitations and appropriate verification methods provide robust protections for all borrowers. The QM product's safeguards themselves – amortizing 30-year mortgages, with low fees and protection against short-reset ARMs – significantly reduce foreclosure rates for borrowers. The foreclosure crisis was caused by the failure of subprime loans, which included over half of mortgages to
Over 11 years of extensive research and review have shown that alternatives to the Final Rule will unnecessarily and unfairly restrict access to credit for borrowers of color. If the
The undersigned groups and many others have been working on QM for 11 years now. Similarly, for the General QM definition, the
We believe this result should be disqualifying because the GSEs should be buying more loans to Black and Latino borrowers, not fewer. In 2019, for example, approximately 4.3% of GSE purchase loans were from Black borrowers and 11% from Hispanic borrowers. Further, according to the
We are highly skeptical that there is a third option waiting to be discovered after all this time.
The priced-based method used in the Final Rule represents a more holistic analysis than the arbitrary focus on a 43% DTI, which is only one of many factors typically considered in underwriting. The priced-based method is a holistic consideration of the numerous factors that are captured by the GSE or lender underwriting and ability to repay considerations to lend within the price-based limit, including but not limited to DTI ratios. In traditional underwriting, a higher DTI can be appropriately offset by other compensating factors. This more complete analysis simply does not lend itself to being set out in a static government regulation that focuses mainly on an arbitrary 43% DTI cap.
A DTI-based General QM definition would likely result in a bifurcated mortgage market, with White borrowers obtaining conventional QMs while borrowers of color are forced into the more expensive FHA QM or forced out of the mortgage market altogether. An unnecessarily restrictive definition of QM would push a considerable share of creditworthy borrowers – including a large share of borrowers of color – out of the mainstream mortgage market and possibly out of the mortgage market altogether. It would result in restricting credit access and steering borrowers of color to certain lending streams and mortgage products. This is a result our organizations wish to avoid. The
If borrowers excluded from the General QM definition could still get a mortgage, they would be forced into one with higher rates, either an FHA loan or one without the product protections that come with QM status. Creditworthy borrowers excluded from QM loans may also be forced into other options like land contracts or other potentially abusive schemes as we see in cities like
Since the Great Recession, 1.5 million families have exited homeownership and entered into the rental market, pushing up costs as there is an extreme lack of affordable housing. These families would be condemned to pay inexorably rising rents. Because a more restrictive QM would make borrowers who receive mortgages pay higher mortgage rates and get foreclosed on at greater rates, and deny others the ability to own a home at all, this kind of QM definition can exacerbate the racial wealth gap rather than help close it and is the opposite goal of the Administration's racial equity priorities.
The Final Rule could be improved by more clearly addressing fair lending concerns, including addressing fair lending in the text of the regulation and limiting the ability of a lender to receive the QM safe harbor where pricing discrimination has occurred. While the holistic approach of the Final Rule provides an inclusive definition of the General QM and therefore ameliorates racial disparities between people able to obtain General QM loans and those condemned to the non-General QM sector, it is important that the
Discrimination, by its nature, requires deception and obfuscation of the true terms and conditions of mortgage products.
Pricing bias leads to the origination of mortgages that are unfair, abusive, and deceptive. The Final Rule could be improved by clearly stating in the text that QM status does not confer a presumption of compliance with fair lending laws. In the preamble to the Final Rule, the
We strongly encourage the
In addition, the
We do not believe that the creditor is making a “reasonable and good faith determination” if the amounts considered by the creditor are inflated based on illegal pricing discrimination. Therefore, the
The creditor should have 30 days, from the date of discovery, to remediate the harm resulting from the likely violation. Should a creditor fail to self-report a likely violation and remediate the harm resulting from a likely violation within 30 days of the date of discovery of the likely violation, and a judicial, administrative, or regulatory body, through a final adjudication (including a public settlement or public consent order) indicates that pricing discrimination in violation of the ECOA has occurred, the safe harbor should not apply to the loan(s) related to that violation. Loans related to that violation may still qualify as QM loans, but they should not be afforded a conclusive presumption of compliance.
* For a first-lien covered transactions with a loan amount greater than or equal to
* For a first-lien covered transaction with a loan amount less than
* For a first-lien covered transaction secured by a manufactured home with a loan amount less than
We believe that the
Finally, the undersigned oppose the final rule for the Seasoned QM Loan Definition that was adopted in December 2020/8 and recommend that the
Thank you for your consideration of our views.
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1/ 86 Fed. Reg. 12839 (
2/ 86 Fed. Reg. 12840.
4/ Urban Institution Housing Finance Policy Center Housing Credit Availability Index, Q3 2020, available at https://www.urban.org/policy-centers/housing-finance-policy-center/projects/housing-credit-availability-index.
5/ 15 U.S.C. 1639b(a)(2).
6/ 85 Fed. Reg. 86340 (
7/ 15 U.S.C. 1639c(a)(1).
8/ 85 Fed. Reg. 86402 (
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The proposed rule can be viewed at: https://www.regulations.gov/document/CFPB-2021-0003-0001
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