On Oct. 1, 2020, Better Markets filed a comment letter on a proposal from the CFPB to amend its “Qualified Mortgage” rules to allow any mortgage to be considered a qualified mortgage so long as it had a limited number of delinquencies in its first three years. This proposal threatens the stability of the housing market, unlawfully exceeds the authority of the CFPB, and offers no concrete benefit to consumers.
In the years leading up to the 2008 housing crisis, predatory lenders foisted high-interest toxic mortgages onto unsuspecting consumers, who soon found themselves struggling to make payments. As defaults mounted and mortgage-backed securities plummeted in value, the entire financial system fell into crisis, nearly collapsing.
The CFPB’s “qualified mortgage” rules were designed to make certain that never happened again. By ensuring that every borrower would be able to actually pay off his or her mortgage before approving the loan. These rules were designed to create a strong but stable housing market. However this latest proposal would allow any mortgage to be considered a qualified mortgage satisfying the “ability to repay” requirement as long as the borrower made payments for three years—even if the homeowner struggled to keep up and was often delinquent.
This change flies in the face of the law, which mandates that a borrower’s ability to repay a loan must be assessed at the time the loan is made and not three years after the fact. Simply looking at three years of payment history, and a potentially checkered one at that, is in no way comparable to a proper ability to repay assessment.
Worse yet, the agency has offered no evidence that this proposal will provide any benefit to consumers at all. In fact the proposal by design would deprive homeowners of the right to dispute the legality of a loan merely because they dutifully made payments on their mortgage.
The CFPB should abandon this massive giveaway to the mortgage industry and get back to its core mission of protecting consumers and stopping financial predators. Read our full comments here, or by clicking the button below.
