In a report examining the effects of the CFPB's regulations establishing standards for qualified mortgage (QM) loans and the final qualified residential mortgage (QRM) rule jointly issued by six agencies, the Government Accountability Office (GAO) found that these regulations would have "limited initial effects" because recent loans already largely conformed with criteria set forth by the QM rule.
The 82-page report, titled "Mortgage Reforms: Actions Needed to Help Assess Effects of New Regulations," was conducted by the GAO at the request of Congress amid concerns that risky mortgage products and poor underwriting standards were contributing factors to the housing crisis of 2008.
QM regulations, which went into effect in January 2014, address lenders' responsibilities to determine a borrower's ability to repay a loan and include prohibitions on risky loan features, such as interest only or balloon payment, and limits on points and fees, according to GAO. QRMs are securities that are collateralized exclusively by residential mortgages, and they are exempt from risk retention requirements. According to GAO, securities collateralized solely by QM loans are also exempt from risk retention requirements. The QRM rule is scheduled to go into effect in December 2015.
GAO's report estimated limited effects of these regulations on availability of mortgages for most borrowers. The report also found that litigation and compliance issues would be at the root of most cost increases for borrowers, lenders, and investors. The QRM regulations were not expected to have a significant initial effect on availability or securitization of mortgages, according to agency officials and observers, because QM loans were expected to comprise the majority of loans originated. GAO stated, however, that the size and viability of the secondary market for non-QRM-backed securities remained in question.
The GAO recommended that "CFPB, HUD, and the six agencies responsible for the QRM regulations should complete plans to review the QM and QRM regulations, including identifying specific metrics, baselines, and analytical methods. CFPB, HUD, and one QRM agency—the Federal Deposit Insurance Corporation—concurred or agreed with the recommendations. The other QRM agencies did not explicitly agree with the recommendations, but outlined ongoing efforts to plan their reviews."
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