CFPB: Financial institutions must be able to make non-QM loans

Financial institutions should be allowed to make mortgages that don't meet qualified mortgage (QM) standards under the new ability-to-repay rules. That is what Consumer Financial Protection Bureau Director Richard Cordray said Thursday in response to a Credit Union National Association question during a financial industry briefing on mortgage rules.

Cordray said it was never the intention of the CFPB that all mortgages should have to meet the QM standards. He added that the agency will be working with prudential regulators to encourage responsible lending for non-QM loans in addition to loans that do meet the QM requirements. Under the ability-to-repay/QM rule, mortgage loans that meet the criteria for a QM will be afforded a higher degree of legal protection than other mortgages, should a lender be sued by a consumer for noncompliance with the ability-to-repay provisions.

Cordray stressed that some borrowers who are in good financial standing but may not meet the parameters of a QM should nonetheless be allowed to obtain a mortgage.

The CFPB plans to issue plain language guides in written and video format and will being fielding questions on implementing the new rules now to assist in meet the rules' requirements. The CFPB will also offer suggestions for implementation planning purposes of financial institutions and will publish materials to help lenders understand the supervisory process that will be undertaken by them and the prudential regulators.

Consumers will also be informed of their rights under these regulations, which include private rights of action under certain provisions.