The Consumer Financial Protection Bureau (CFPB) recently announced plans to assess the effectiveness of the Ability-to-Repay/Qualified Mortgage rule (ATR/QM rule) and is seeking public comment to help with the assessment.
CFPB officials said the assessment will advance its knowledge of the benefits and costs of the ATR/QM rule, which was part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
The rule came about after the 2008 financial crisis when lenders made mortgage loans that consumers could not pay back. In the Dodd-Frank Act, Congress established new standards for mortgage lending that, among other things, required lenders to assess consumers’ ability to repay. The Dodd-Frank Act also provided for a class of “qualified mortgage” loans that cannot have certain risky product features and are presumed to comply with the ATR requirement.
Congress authorized the CFPB to issue rules that would make the new ATR and QM standards clear and effective. Consequently, CFPB issued a rule to implement these standards that took effect on January 10, 2014.
The ATR/QM rule, among other things, requires mortgage lenders to make a reasonable and good faith determination, based on verified and documented information, that the consumer has a reasonable ability to repay the loan, including any mortgage-related obligations (such as property taxes), according to the loan’s terms. Lenders generally must take into consideration certain factors in determining a consumer’s repayment ability, including the consumer’s income, assets, and debt. The ability-to-repay requirements, however, do not specify particular underwriting standards that lenders must follow.
The ATR/QM rule also establishes several categories of “qualified mortgage” loans. In creating the general class of QM loans, Congress sought to provide certainty to lenders regarding compliance with the ATR standard for loans that do not have certain risky product features.
In addition to requiring the CFPB to write rules to implement consumer protection statutes, the Dodd-Frank Act requires it to review the rules within five years after they take effect. These required reviews are called assessments.
“We are conducting an assessment of our ATR/QM rule, and we will issue a report of the assessment by January 2019. As required by law, the assessment will address the rule’s effectiveness in meeting the purposes and objectives of Title X of the Dodd-Frank Act and the specific goals of the ATR/QM rule, using available evidence and data,” CFPB officials said.
It recently released its plan for the RESPA mortgage servicing rule assessment.
“We would like your help in improving the assessment. We invite consumers, consumer advocates, mortgage loan creditors, industry representatives, and other interested parties to comment on our assessment plan, suggest sources of data, offer other recommendations, and generally provide information that would help us with this work,” CFPB said.
The public has 60 days to comment after it is published in the Federal Register.