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MCUA Raises Concerns About QMs, Disparate Impact in Comment Letter on Credit Risk Retention

The Missouri Credit Union Association (MCUA) has filed a comment letter on an interagency proposed rule regarding credit risk retention, including a proposed definition of “qualified residential mortgage” (QRM), which is identical to the CFPB’s “qualified mortgage” (QM) definition. Our overarching concern is that we do not think the QM/QRM should become the only type of mortgage that regulators will permit or that the secondary market will accommodate. However, absent some flexibility for creditors under the rule, that is precisely what we believe will happen.

We are also concerned about disparate impact issues that we believe will inevitably develop because lenders are incentivized under the rule to generate only QM/QRM loans. The statement on disparate impact that the agencies issued in October is undoubtedly well intended, but few believe it will provide any practical relief or protection if a lender is challenged in court by a consumer who likely should have received a mortgage absent the debt-to-income or other requirements.

We strongly oppose the QM-Plus alternative to QRM considered in the proposal, and urge the agencies to drop it, as we believe significantly fewer loans would qualify as a QRM and be exempt from risk retention under this alternative. We believe the QM-Plus approach would have a negative impact on many credit unions defined as small creditors under the CFPB’s QM rule, and the members of these credit unions. If the agencies choose to pursue QM-Plus, we urge them to modify the standard in a way that alleviates the very real concerns described in our letter.