July 9, 2012ASF’s letter outlines the risks and costs of litigation in connection with defining QMs, and especially highlights investor and secondary market concerns with the proposal. Larry Platt and Kris Kully of K&L Gates LLP continue to serve as ASF’s outside counsel on this issue.
ASF Supplemental Comment Letter: Regulation Z; Truth in Lending (QM) - July 9, 2012
ASF Comment Letter: Regulation Z; Truth in Lending (QM) - July 22, 2011
CFPB Reopening of Comment Period; Request for Comment: Regulation Z; Truth in Lending (QM) - May 31, 2012
The NPR proposed amendments to Regulation Z, established under the Truth in Lending Act (“TILA”), concerning the establishment of a QM definition as a standard for complying with the NPR’s proposed ability-to-repay requirements. The CFPB reopened the comment period in response to data received from the Federal Housing Finance Agency (“FHFA”) tracking the performance of Fannie Mae and Freddie Mac loans from 1997 to 2011, as well as data on other securitized mortgage loans. The CFPB sought comment solely on the issues outlined in the release, and did not reopen comment on other aspects of the NPR, as it expects to issue the final rule before the end of 2012. Please click here for the notice reopening the comment period and here for the press release.
Background
We recommend that the proposed rule should be revised to clarify with certainty the definition of a QM and the legal consequence of a loan rising to the level of QM status. We stress that reasonable access to credit will depend on a bright line, objective test for a QM and believe that the capital markets require that the QM result in a safe harbor rather than a rebuttable presumption, so that assignees are appropriately protected. We also believe that a demonstrated ability to repay over a certain time period should result in safe harbor protection. Please click here for ASF’s comment letter, here for ASF’s press release, and here for the NPR.
While the NPR was originally issued by the FRB pursuant to the Dodd-Frank Act on May 11, 2011, the FRB’s rulemaking authority under TILA was transferred to the CFPB on July 21, 2011, upon the opening of the Bureau. Consequently, the NPR has become a proposal of, and will be finalized by, the CFPB.
CFPB Proposed Rule: Regulation Z; Truth in Lending (QM) - May 11, 2011