WASHINGTON — Senate Democrats are warning the Consumer Financial Protection Bureau to be careful as it considers changes to its mortgage underwriting rules.
Under existing rules, lenders must ensure borrowers have the ability to repay before extending a mortgage. But the CFPB also crafted an exception for so-called qualified mortgages that meet certain criteria under which lenders face less legal liability. The CFPB is considering changes to both its ability-to-repay and QM rules.
Nine senators, including Sherrod Brown of Ohio, the top Democrat on the Banking Committee, and presidential candidate Elizabeth Warren, D-Mass., said they were concerned about the CFPB’s possible plans.
“As you consider amending the existing QM rule, the bureau must not undermine the elements of the rule that have made it effective: prohibitions on unsustainable product features and a verifiable demonstration at loan origination that the lender has evaluated the borrower’s ability to repay their loan,” the senators wrote Tuesday.
They are specifically worried about plans to end the “QM patch,” under which all mortgages that qualify for purchase by Fannie Mae and Freddie Mac are automatically considered QM loans. The patch is set to expire in January 2021, sparking concerns that mortgage prices could rise and that minority borrowers in particular might not be able to qualify for QM loans.
“Based on the CFPB’s own analysis, if lenders remain unwilling to originate loans for average families without full liability protection, this could further restrict access to credit for borrowers of color, who represent a disproportionate share of QM patch loans and remain underserved by conventional mortgage credit,” the senators wrote. “Further restricting borrowers’ access to affordable mortgage credit that is properly underwritten was not the intent of the ATR or QM statutory provisions, nor should it be the intent of the bureau.”