Credit unions are likely to reduce their origination of mortgages that don’t adhere to requirements laid out by the Consumer Financial Protection Bureau effective January 2014.
Approximately 88% of credit unions who responded to a National Association of Federal Credit Unions (NAFCU) survey said they will reduce their production of mortgages that do not meet CFPB “qualified mortgage” and “ability to repay” rules, according to the survey. About half of those respondents said they would wipe-out non-QM
The proposed qualified mortgage requirements include that the loan have as high as a 20% down payment, have maximum 30-years amortizing payment (no interest-only), a debt-to-income no higher than 43%, a 3% cap on loan officer’s compensation and fees, among many other requirements.
Although a final rule was written in January 2013, the enactment implications of the rules after January 2014 are still forcing some to push for changes. The credit union lobby, for instance, is hoping to change some of the requirements that will specifically hurt their business once they go into effect.
“We are quite concerned that a borrower cannot have a DTI over 43%,” said Mary Dunn, senior vice president and deputy general counsel in the Credit Union National Association in Washington DC. She said that most of credit unions’ customers are lower-income people who would not meet this requirement.
One of her biggest concerns is not that Fannie and Freddie will not purchase non-QM loans, but that examiners of credit unions will be particularly harsh on credit unions for having non-QM loans on their balance sheets, she added.
Everyone is being overregulated and therefore everyone will be making less of non-QM loans, regardless of what type of institutions you are, said Barbara Aiken, marketing director of Amerisave Mortgage Corporation in Atlanta, Georgia, its headquarters. If a loan that doesn’t meet necessary requirements, it’s not likely to be sold into the secondary market, unless a new, liquid private (non-GSE) market returns, which is yet to be seen.
“What I do know, however, is that nothing is forever and therefore no changes will be forever,” she added.