Currently, there are two versions of the QM rule being considered – one with a “safe harbor” or one with a “rebuttable presumption of compliance.”
NTC stated that under a legal safe harbor, lenders who originated a loan under QM guidelines will have certain protections from litigation. With a safe harbor, lenders will be in the clear if they have met QM guidelines.
On the other hand, NTC explained that a rebuttable presumption of compliance means that a lender can still be liable for a lawsuit even if it has met QM guidelines. NTC stated a consumer can still sue lenders for reasons outside the normal underwriting process. Also, under a rebuttable presumption of compliance, a consumer can use his or her lack of ability to repay the mortgage as a foreclosure defense, even if the lender followed underwriting guidelines set forth by the Consumer Financial Protection Bureau (CFPB).
“With a safe harbor, costs will be reduced for qualified borrowers and it will decrease the chance that lenders will leave the market,” said NTCCEO John Hillman. “Under the rebuttable presumption of compliance, lenders will be apt to be ultra conservative in originating loans, potentially making homeownership less affordable to many Americans… [A rebuttable presumption] also means the costs of the resulting litigation will ultimately be paid for by all borrowers through increases in all loan rates to account for the future potential litigation.”
The CFPB is expected to make a decision after the November elections.
Headquartered in Palm Harbor, Florida, NTC is a national firm that performs research services and processes documents for the residential mortgage servicing industry.
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