[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25246-25250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11218]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2017-0014]
Request for Information Regarding Ability-to-Repay/Qualified
Mortgage Rule Assessment
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice of assessment of Ability-to-Repay/Qualified Mortgage
rule and request for public comment.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
conducting an assessment of the ATR/QM Rule under the Truth in Lending
Act (Regulation Z), in accordance with section 1022(d) of the Dodd-
Frank Wall Street Reform and Consumer Protection Act. The Bureau is
requesting public comment on its plans for assessing this rule as well
as certain recommendations and information that may be useful in
conducting the planned assessment.
DATES: Comments must be received on or before: July 31, 2017.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2017-
0014, by any of the following methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Email: [email protected]. Include Docket
No. CFPB-2017-0014 in the subject line of the email.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1275 First
Street NE., Washington, DC 20002.
Instructions: All submissions should include the document title and
docket number. Because paper mail in the Washington, DC area and at the
Bureau is subject to delay, commenters are encouraged to submit
comments electronically. In general, all comments received will be
posted without change to http://www.regulations.gov. In addition,
comments will be available for public inspection and copying at 1275
First Street NE., Washington, DC 20002 on official business days
between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an
appointment to inspect the documents by telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or Social
Security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Sergei Kulaev, Economist; Julie Vore,
Originations Program Manager; Nicholas Hluchyj, Senior Counsel;
Division of Research, Markets, and Regulations at 202-435-9323.
SUPPLEMENTARY INFORMATION:
I. Background
Congress established the Bureau in the Dodd-Frank Wall Street
Reform and Consumer Protection Act (Dodd-Frank Act).\1\ In the Dodd-
Frank Act, Congress generally consolidated in the Bureau the rulemaking
authority for Federal consumer financial laws previously vested in
certain other Federal agencies. Congress also provided the Bureau with
the authority to, among other things, prescribe rules as may be
necessary or appropriate to enable the Bureau to
[[Page 25247]]
administer and carry out the purposes and objectives of the Federal
consumer financial laws and to prevent evasions thereof.\2\ Since 2011,
the Bureau has issued a number of rules adopted under Federal consumer
financial law.
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\1\ Public Law 111-203, 124 Stat. 1376 (2010).
\2\ 12 U.S.C. 5512(b)(1).
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Section 1022(d) of the Dodd-Frank Act requires the Bureau to
conduct an assessment of each significant rule or order adopted by the
Bureau under Federal consumer financial law. The Bureau must publish a
report of the assessment not later than five years after the effective
date of such rule or order. The assessment must address, among other
relevant factors, the rule's effectiveness in meeting the purposes and
objectives of title X of the Dodd-Frank Act and the specific goals
stated by the Bureau. The assessment also must reflect available
evidence and any data that the Bureau reasonably may collect. Before
publishing a report of its assessment, the Bureau must invite public
comment on recommendations for modifying, expanding, or eliminating the
significant rule or order.\3\
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\3\ 12 U.S.C. 5512(d).
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In January 2013, the Bureau issued a rule titled ``Ability-to-Repay
and Qualified Mortgage Standards Under the Truth in Lending Act
(Regulation Z)'' to implement sections 1411, 1412, and 1414 of the
Dodd-Frank Act with an effective date of January 10, 2014.\4\ This
document refers to this rule as the ``January 2013 Rule.'' The Bureau
amended the January 2013 Rule on several occasions before its effective
date.\5\ This document refers to the rule as amended when it took
effect on January 10, 2014 as ``the ATR/QM Rule.'' As discussed further
below, the Bureau has determined that the ATR/QM Rule is a significant
rule and it will conduct an assessment of this rule. Furthermore, the
Bureau will consider certain amendments to the rule that the Bureau
issued after its January 10, 2014, effective date to the extent that
doing so will facilitate a more meaningful assessment of the ATR/QM
Rule and data is available.\6\ In this document, the Bureau is
requesting public comment on the issues identified below regarding the
ATR/QM Rule and these subsequent amendments.
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\4\ 78 FR 6408 (Jan. 30, 2013).
\5\ When the January 2013 Rule was issued, the Bureau
concurrently issued a proposal to amend it, and that proposal was
finalized on May 29, 2013. See 78 FR 6621 (Jan. 30, 2013) (January
2013 ATR Proposal) and 78 FR 35429 (June 12, 2013) (May 2013 ATR
Final Rule). The Bureau issued additional corrections and
clarifications in the summer and fall of 2013. See 78 FR 44685 (July
24, 2013) and 78 FR 60381 (Oct. 1, 2013).
\6\ In the fall of 2014, the Bureau made further amendments to
the ATR/QM Rule related to nonprofit entities and provided a cure
mechanism for the points and fees limit that applies to qualified
mortgages. 79 FR 65300 (Nov. 3, 2014). The definitions of small
creditor and rural area were revised in the fall of 2015. 80 FR
49945 (Oct. 2, 2015). The rural area definition was further revised
in the spring of 2016. 81 FR 16074 (March 25, 2016).
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II. Assessment Process
Assessments pursuant to section 1022(d) of the Dodd-Frank Act are
for informational purposes only and are not part of any formal or
informal rulemaking proceedings under the Administrative Procedure Act.
The Bureau plans to consider relevant comments and other information
received as it conducts the assessment and prepares an assessment
report. The Bureau does not, however, expect that it will respond in
the assessment report to each comment received pursuant to this
document. Furthermore, the Bureau does not anticipate that the
assessment report will include specific proposals by the Bureau to
modify any rules, although the findings made in the assessment will
help to inform the Bureau's thinking as to whether to consider
commencing a rulemaking proceeding in the future.\7\ Upon completion of
the assessment, the Bureau plans to issue an assessment report not
later than January 10, 2019.
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\7\ The Bureau announces its rulemaking plans in semiannual
updates of its rulemaking agenda, which are posted as part of the
federal government's Unified Agenda of Regulatory and Deregulatory
Actions. http://www.reginfo.gov/public/do/eAgendaMain.
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III. The Ability-to-Repay/Qualified Mortgage Rule
Congress adopted the Dodd-Frank Act in response to an unprecedented
cycle of expansion and contraction in the mortgage market that sparked
the most severe U.S. recession since the Great Depression. In the Dodd-
Frank Act, Congress enacted a significant number of new provisions
governing the origination and servicing of consumer mortgages. Among
them is the ability-to-repay requirement for mortgage loans, which was
implemented by the Bureau in its January 2013 Rule. The major
provisions of the rule are summarized below.
A. Major Provisions of the ATR/QM Rule
The ATR/QM Rule prohibits a creditor from making a mortgage loan
unless the creditor makes a reasonable and good faith determination,
based on verified and documented information, that the consumer will
have a reasonable ability to repay the loan, including any mortgage-
related obligations (such as property taxes).\8\ The requirement does
not apply to investment loans, open-end home equity lines of credit,
timeshare plans, reverse mortgages, or temporary loans.
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\8\ TILA section 129C(a); 15 U.S.C. 1639c(a). Prior to the Dodd-
Frank Act, existing Regulation Z provided ability-to-repay
requirements for high cost and higher-priced mortgage loans. The
Dodd-Frank Act expanded the scope of the ability-to-repay
requirement to cover all residential mortgage loans.
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The ATR/QM Rule describes certain minimum requirements for
creditors making ability-to-repay determinations, but does not dictate
that they follow particular underwriting standards. At a minimum,
creditors generally must consider eight underwriting factors: (i)
Current or reasonably expected income or assets; (ii) current
employment status, if the creditor relies on income from employment in
determining repayment ability; (iii) the monthly payment on the covered
transaction; (iv) the monthly payment on any simultaneous loan(s) that
the creditor knows or has reason to know will be made; (v) the monthly
payment for mortgage-related obligations; (vi) current debt
obligations, alimony, and child support; (vii) the monthly debt-to-
income ratio or residual income; and (viii) credit history.\9\
Creditors generally must use reasonably reliable third-party records to
verify the information they use to determine repayment ability.\10\
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\9\ 12 CFR 1026.43(c)(2).
\10\ 12 CFR 1026.43(c)(3), (4).
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The ATR/QM Rule also provides for a class of ``qualified mortgage''
(QM) loans, for which compliance with the ATR requirement is
presumed.\11\ That presumption of compliance can be either conclusive,
i.e. a safe harbor, for QM loans that are not ``higher-priced'', or
rebuttable, for QM loans that are ``higher-priced.'' \12\
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\11\ TILA section 129C(b); 15 U.S.C. 1639c(b); 12 CFR 1026.43(c)
\12\ 12 CFR 1026.43(e)(1).
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The ATR/QM Rule defines QM loans by establishing general
underwriting criteria, as well as restrictions on product features and
costs. Specifically, restrictions on product features include
prohibitions against negative amortization, balloon payments, interest-
only payments, and terms greater than 30 years.\13\ In addition, the
total points and fees payable in connection with a QM Loan must not
exceed a certain percentage of the loan amount.\14\
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\13\ 12 CFR 1026.43(e)(2).
\14\ 12 CFR 1026.43(e)(3).
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There are several categories of QM loans. One category is referred
to as ``General QM Loans.'' In its determination of borrower's income
and debt obligations for a General QM Loan,
[[Page 25248]]
a creditor must adhere to requirements provided in Appendix Q, and it
must ensure that the ratio of the consumer's total monthly debt to
total monthly income does not exceed 43% (DTI ceiling).\15\ The
criteria for General QM Loans further require that creditors calculate
mortgage payments based on the highest payment that will apply in the
first five years of the loan.\16\
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\15\ 12 CFR 1026.43(e)(2)(vi).
\16\ 12 CFR 1026.43(e)(2(iv).
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The ATR/QM Rule provides a separate, temporary category of QM loans
for loans eligible to be purchased or guaranteed by either the Federal
National Mortgage Association or the Federal Home Loan Mortgage
Corporation (collectively, the GSEs) while they operate under Federal
conservatorship or receivership (``Temporary GSE QM'' loans). This
category of Temporary GSE QM loans will continue to be in effect until
the earlier of: (i) The end of conservatorship; or (ii) January 10,
2021.\17\
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\17\ 12 CFR 1026.43(e)(4)(ii)(A).
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The rule also provided a temporary category of QM loans for loans
eligible to be insured by the U.S. Department of Housing and Urban
Development (FHA Loans); guaranteed by the U.S Department of Veterans
Affairs (VA Loans); guaranteed by the U.S. Department of Agriculture
(USDA Loans); or insured by the Rural Housing Service (RHS Loans)
(collectively, ``Temporary Federal Agency QM'' loans).\18\ The category
of Temporary Federal Agency QM loans no longer exists and has been
replaced by the category of Federal Agency QM loans because the
relevant Federal agencies (i.e., FHA, VA, and USDA/RHS) have all issued
their own qualified mortgage rules since 2014.\19\ The Bureau is not
including these Federal Agency QM rules in the assessment, which is
limited to the Bureau's own ATR/QM Rule.
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\18\ 12 CFR 1026.43(e)(4)(ii)(B) through (E).
\19\ See, e.g., 24 CFR 203.19 for HUD rules.
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A fourth category of qualified mortgages provides more flexible
underwriting standards for small creditor portfolio loans,\20\ and a
fifth category allows small creditors that operate in rural or
underserved areas to make balloon-payment portfolio loans that are
qualified mortgages.\21\
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\20\ 12 CFR 1026.43(e)(5).
\21\ 12 CFR 1026.43(f).
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B. Significant Rule Determination
The Bureau has determined that the ATR/QM Rule is a significant
rule for purposes of Dodd-Frank Act section 1022(d). The Bureau
believes that the initial impact of the rule on costs was muted given
market conditions prevailing at the time and the Bureau's decision to
create a broad temporary category of QM loans, particularly the
Temporary GSE QM loans. The Bureau understands, however, that the
industry's strong preference to obtain a presumption of compliance with
the ATR/QM Rule by originating QM loans has resulted in meaningful
changes in originations operations across the market. The Bureau also
takes into consideration the possible impact of the rule on access to
credit in particular submarkets and possible impacts on innovation,
overall product design and competition. Considering these factors,
coupled with the Bureau's more general interest to better understand
how the rule's impacts vary under different market conditions, the
Bureau concludes that the ATR/QM Rule is a significant rule for
purposes of section 1022(d).
IV. The Assessment Plan
Because the Bureau has determined that the ATR/QM Rule is a
significant rule for purposes of section 1022(d), the Bureau will
assess the rule's effectiveness in meeting the general purposes and
objectives of title X of the Dodd-Frank Act and the specific goals of
the ATR/QM Rule as stated by the Bureau.
Purposes and Objectives. Section 1021 of the Dodd-Frank Act states
that the Bureau shall seek to implement and, where applicable, enforce
Federal consumer financial law consistently for the purpose of ensuring
that all consumers have access to markets for consumer financial
products and services and that markets for consumer financial products
and services are fair, transparent, and competitive. Section 1021 also
sets forth the Bureau's objectives, which are to exercise its
authorities under Federal consumer financial law for the purposes of
ensuring that, with respect to consumer financial products and
services:
(a) Consumers are provided with timely and understandable
information to make responsible decisions about financial transactions;
(b) Consumers are protected from unfair, deceptive, or abusive acts
and practices and from discrimination;
(c) Outdated, unnecessary, or unduly burdensome regulations are
regularly identified and addressed in order to reduce unwarranted
regulatory burdens;
(d) Federal consumer financial law is enforced consistently,
without regard to the status of a person as a depository institution,
in order to promote fair competition; and
(e) Markets for consumer financial products and services operate
transparently and efficiently to facilitate access and innovation.
Specific goals of the ATR/QM Rule. Section 1402 of the Dodd-Frank
Act states that Congress created new TILA section 129C upon a finding
that ``economic stabilization would be enhanced by the protection,
limitation, and regulation of the terms of residential mortgage credit
and the practices related to such credit, while ensuring that
responsible, affordable mortgage credit remains available to
consumers.'' \22\ Section 1402 of the Dodd-Frank Act further states
that the purpose of TILA section 129C is to ``assure that consumers are
offered and receive residential mortgage loans on terms that reasonably
reflect their ability to repay the loans and that are understandable
and not unfair, deceptive or abusive.'' \23\
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\22\ TILA section 129B(a)(1), 15 U.S.C. 1639b(a)(1).
\23\ TILA section 129B(a)(2), 15 U.S.C. 1639b(a)(2).
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In its January 2013 Rule implementing these TILA amendments, the
Bureau recognized that ``a primary goal of the statute was to prevent a
repeat of the deterioration of lending standards that contributed to
the financial crisis, which harmed consumers in various ways and
significantly curtailed their access to credit.'' \24\ The Dodd Frank
Act achieves these goals in part by requiring that, for residential
mortgages, creditors must make a reasonable and good faith
determination based on verified and documented information that the
consumer has a reasonable ability to repay the loan according to its
terms.
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\24\ 78 FR 6408, 6570 (Jan. 30, 2013).
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However, as the Bureau recognized in its January 2013 Rule, neither
the statutory text nor legislative history of the Dodd-Frank Act
provide any indication that Congress intended to replace proprietary
underwriting standards with underwriting standards dictated by
governmental or government-sponsored entities as part of the ability-
to-repay requirements.\25\ Recognizing that a variety of underwriting
standards could yield a reasonable, good faith ability-to-repay
determination, the Bureau promulgated the ATR/QM Rule with the goal of
preserving creditor flexibility to develop underwriting standards,
which is ``necessary given the wide range of creditors, consumers, and
mortgage products to which this rule applies.'' \26\
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\25\ 78 FR 6408, 6461 (Jan. 30, 2013).
\26\ 78 FR 6408, 6579 (Jan. 30, 2013).
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[[Page 25249]]
The Dodd-Frank Act also establishes a category of QM loans and
provides that QM loans are entitled to a presumption that the creditor
making the loan satisfied the ability-to-repay requirement. In
promulgating regulations to implement the statutory requirement, ``the
Bureau has sought to balance creating new protections for consumers and
new responsibilities for creditors with preserving consumers' access to
credit and allowing for appropriate lending and innovation.'' \27\ For
example, by establishing the categories of temporary QM loans, the
Bureau sought to ``preserve access to credit during a transition period
while the mortgage industry adjusts to this final rule and during a
time when the market is especially fragile.'' \28\ By providing for
most of the conventional market to continue to originate higher debt-
to-income loans as QM loans, but making that provision temporary (i.e,
the Temporary GSE QM), the Bureau sought, over the long term, to
encourage innovation and responsible lending on an individual basis
under the ability-to-repay criteria.\29\
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\27\ 78 FR 6408, 6505 (Jan. 30, 2013).
\28\ 78 FR 6408, 6536 (Jan. 30, 2013).
\29\ 78 FR 6408, 6527-6528 (Jan. 30, 2013).
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Related objectives of the rule include ensuring accurate
verification procedures and that creditors and the secondary market can
readily determine whether a particular loan is a QM loan.\30\
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\30\ 78 FR 6408, 6527 (Jan. 30, 2013).
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Scope and approach. To assess the effectiveness of the ATR/QM Rule
in meeting these goals, the Bureau will examine the impact of major
provisions of the rule on a set of consumer outcomes, including: (i)
Mortgage cost; (ii) origination volumes; (iii) approval rates; and (iv)
subsequent loan performance. In addition to these measurable outcomes,
the Bureau will also consider changes in creditors' underwriting
policies and procedures that were made in connection with the rule and
which might affect consumer outcomes. The major provisions to be
examined are: (i) The ATR requirements, including the eight
underwriting factors a creditor must consider; (ii) the QM provisions,
with a focus on the DTI threshold, the points and fees threshold, the
small creditor threshold and the Appendix Q requirements; and (iii) the
applicable verification and third-party documentation requirements.
As a part of this assessment, the Bureau will evaluate the
effectiveness and impacts of the Temporary GSE QM category, to the
extent that available data and resources allow, and the Bureau may
consider potential consequences of the January 10, 2021, expiration or
earlier termination of this provision.
In analyzing the impact of the rule on consumer outcomes, certain
categories of borrowers are of special interest (in no particular
order): (i) Borrowers generating income from self-employment (including
those working as ``contract'' or ``1099'' employees); (ii) borrowers
anticipated to rely on income from assets to repay the loan; (iii)
borrowers who rely on intermittent, supplemental, part-time, seasonal,
bonus, or overtime income; (iv) borrowers seeking smaller-than-average
loan amounts; (v) borrowers with a debt-to-income ratio exceeding 43%;
(vi) low and moderate income borrowers; (vii) minority borrowers; and
(viii) rural borrowers. The Bureau will also examine any differential
impact the rule may have on these categories of borrowers, to the
extent available data allow. The Bureau will also examine differential
impacts of the rule on different types of creditors to the extent the
data allow.
As a general matter, the assessment will associate rule
requirements with observed outcomes of interest and consider
counterfactual outcomes, to the extent possible. These include outcomes
that did not actually occur but were considered reasonable
possibilities at the time the rule was issued, and outcomes that might
have occurred if only some (but not all) rule requirements had taken
effect. The presence of multiple confounding factors that affect loan
performance and access to credit independently of the rule do not
generally allow for exact measures of the impact of the rule. In
general, any statistical association between observed outcomes and
requirements of the rule, while informative on the effectiveness of the
rule, is not a proof of causal relationship. However, the Bureau will
consider plausible scenarios, specific to each requirement, using
existing mortgage datasets and data that the Bureau may reasonably
collect (see more detail below regarding the Bureau's research
activities and comment requests).
The Bureau anticipates that the assessment will primarily focus on
the ATR/QM Rule's requirements in achieving the goal of preserving
consumer access to responsible, affordable credit. The Bureau stated
with the January 2013 Rule its belief that the ATR/QM Rule ``will not
lead to a significant reduction in consumers' access to consumer
financial products and services, namely mortgage credit.'' \31\ The
Bureau took into consideration, however, the potential that the rule
``may have a disproportionate impact on access to credit for consumers
with atypical financial characteristics, such as income streams that
are inconsistent over time or particularly difficult to document.''
\32\ Likewise, in defining a QM loan, the Bureau observed that ``it is
not possible by rule to define every instance in which a mortgage is
affordable,'' \33\ and that ``an overly broad definition of qualified
mortgage could stigmatize non-qualified mortgages or leave insufficient
liquidity for such loans.'' \34\
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\31\ 78 FR 6408, 6570 (Jan. 30, 2013).
\32\ 78 FR 6408, 6570 (Jan. 30, 2013).
\33\ 78 FR 6408, 6505 (Jan. 30, 2013).
\34\ 78 FR 6408, 6505 (Jan. 30, 2013).
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The Bureau would ideally be able to assess the effectiveness of the
rule in preventing unaffordable lending. The challenge for this
analysis is that credit conditions were already fairly tight at the
time the ATR/QM Rule went into effect. Before the ATR/QM Rule took
effect, the type of nontraditional products that had been offered prior
to the Great Recession were no longer being offered, document
requirements were stringent, and many creditors were applying credit
overlays on top of secondary market standards. Default rates on loans
originated after the start of the Great Recession through the period
preceding the effective date of the ATR/QM Rule were very low.
In these market conditions, there were likely few if any loans
originated where the borrower was demonstrably lacking the ability to
repay or creditors failed to use underwriting factors or conduct
verification in a manner that would have been generally consistent with
1026.43(c), nor is there a method of reliable identification of such
loans. The Bureau seeks suggestions (and associated data) for how to
study the potential effectiveness of the requirements, possibly in
other market conditions, in reducing the origination of mortgage loans
for which consumers lack the ability to repay.
Specific research activities. The Bureau plans to conduct or has
begun conducting several research activities in connection with this
assessment. Other research activities may also be considered as
appropriate.
1. Quantitative research on loan originations, rejection rates, and
loan performance, using available mortgage data and data that the
Bureau may reasonably collect.
The currently available data includes HMDA, third party servicing
data,
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Fannie/Freddie public loan level data, and the National Mortgage
Database (NMDB).\35\ In addition, the Bureau is planning a limited
request of data directly from creditors and other stakeholders. As a
preliminary matter, the following types of analyses might be
informative of the impact of the rule (the Bureau will consider other
analyses as well):
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\35\ The NMDB is an ongoing project, jointly undertaken by the
Federal Housing Finance Agency (FHFA) and the Bureau, with the goal
of providing the public and regulatory agencies with data that does
not include any personally identifiable information but that
otherwise may serve as a comprehensive resource about the U.S.
residential mortgage market. The core data in the NMDB are drawn
from a random, personally anonymous, 1-in-20 sample of all credit
bureau records associated with a closed-end, first-lien mortgage,
updated quarterly. Mortgages, after being unlinked from any
personally identifiable information or characteristics that could be
traced back to any borrower, are followed in the NMDB database until
they terminate through prepayment (including refinancing),
foreclosure, or maturity. The information available to the FHFA,
CFPB, or any other authorized user of the NMDB data never includes
any personally identifiable information.
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(a) The Bureau will utilize HMDA for an analysis of both broad
market trends in origination volumes and trends for particular sub-
populations, as well as any changes in the frequency of rejected
applications and causes for rejections, including before and after the
introduction of the rule. This analysis, although not directly
informative of the impact of the rule, may indicate whether there were
any significant changes in the market right after the introduction of
the rule.
(b) The Bureau will use datasets, such as NMDB or servicing
datasets, that contain information about debt-to-income ratios to
analyze changes in origination volumes of jumbo loans with debt-to-
income ratios around the 43% cutoff for QM loans.
(c) The Bureau may conduct a similar analysis with respect to the
points and fees threshold, provided the available data allow. The
Bureau may perform this analysis for both jumbo loans and conforming
loans because conforming loans also must satisfy the points and fees
test in order to receive QM status.
(d) To the extent the existing data and resources allow, the Bureau
will examine rates of delinquency and default among major categories of
loans: Non-QM loans; General QM Loans, and Temporary GSE QM Loans.
Although the absolute default rates might have been affected by factors
other than the rule, changes in relative default rates between
different types of QM loans and between QM loans and non-QM loans may
be informative regarding the impact of the rule.
2. Analysis of cost of credit before and after the rule, as well as
recent trends.
Among other datasets that provide insight in mortgage pricing, of
particular value are data procured by the Bureau from Informa Research
Services, which includes daily rate sheets for thirty to fifty top
creditors, depending on the period. These data present a unique
opportunity to study changes in cost of credit as well as changes in
eligibility requirements that may have occurred after the introduction
of the rule.
3. Interviews with creditors regarding their activities undertaken
to comply with the requirements of the ATR/QM Rule.
Through interviews with creditors, the Bureau will obtain
information on: (a) The changes that creditors might have made to their
business practices in connection with the requirements of the rule,
including leaving the market; (b) any reported challenges in meeting
the rule's requirements, as experienced by creditors in the three years
since the rule has become effective; and (c) creditors' experience with
the Temporary GSE QM, including their consideration of the eventual
expiration of this provision. The primary goal of the research is to
understand any changes in pricing and underwriting strategies made by
creditors in connection with the requirements of the rule and the
possible impact on access to credit for consumers.
4. Consultations with government regulatory agencies, government
sponsored enterprises, and private market participants.
The Bureau believes that a non-trivial share of current GSE-
eligible and FHA/VA/RHA-eligible loans have a debt-to-income ratio
exceeding 43 percent. Additionally, there may exist a yet unspecified
quantity of GSE or government-eligible loans that meet GSE or
government underwriting guidelines but do not meet Appendix Q
requirements on documentation and calculation of income and debt. Many
such loans would not have been QM if not for the temporary provision
(although potentially a subset of those loans could have been QM if
documented consistent with Appendix Q and if the DTI ratio calculated
consistent with Appendix Q were at or below 43%). In consultations with
regulators, GSEs, and private market participants, the Bureau seeks to
obtain data to analyze, or otherwise develop an understanding, of how
many loans fall within this category, how effective the provision has
been in preserving access to credit, and anticipated market responses
if the temporary provision were to expire.
V. Request for Comment
To inform the assessment, the Bureau hereby invites members of the
public to submit information and other comments relevant to the issues
identified below, as well as any information relevant to assessing the
effectiveness of the ATR/QM Rule in meeting the purposes and objectives
of Title X of the Dodd-Frank Act (section 1021) and the specific goals
of the Bureau (enumerated above). In particular, the Bureau invites the
public, including consumers and their advocates, housing counselors,
mortgage creditors and other industry representatives, industry
analysts, and other interested persons to submit the following:
(1) Comments on the feasibility and effectiveness of the assessment
plan, the objectives of the ATR/QM Rule that the Bureau intends to
emphasize in the assessment, and the outcomes, metrics, baselines, and
analytical methods for assessing the effectiveness of the rule as
described in part IV above;
(2) Data and other factual information that may be useful for
executing the Bureau's assessment plan, as described in part IV above;
(3) Recommendations to improve the assessment plan, as well as
data, other factual information, and sources of data that would be
useful and available to execute any recommended improvements to the
assessment plan;
(4) Data and other factual information about the benefits and costs
of the ATR/QM Rule for consumers, creditors, and other stakeholders in
the mortgage industry; and about the impacts of the rule on
transparency, efficiency, access, and innovation in the mortgage
market;
(5) Data and other factual information about the rule's
effectiveness in meeting the purposes and objectives of Title X of the
Dodd-Frank Act (section 1021), which are listed in part IV above;
(6) Recommendations for modifying, expanding, or eliminating the
ATR/QM Rule.
Dated: May 23, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-11218 Filed 5-31-17; 8:45 am]
BILLING CODE 4810-AM-P