The Independent Community Bankers of America (ICBA) is pushing for the federal banking agencies to not too narrowly define ‘qualified residential mortgage’ (QRM) out of concern that too stringent a definition would put member banks at a competitive disadvantage.
‘Calls by some in the industry to impose by regulation an extremely strict definition of 'qualified residential mortgage' would not ensure conservative underwriting as much as permit the largest institutions to gain market share and further consolidate the mortgage industry, driving community banks and other competitors out of the mortgage business, limiting consumer choice and raising the cost of mortgages for borrowers,’ ICBA President and CEO Camden R. Fine wrote in a letter to regulators last week.
Under Section 941 of the Dodd-Frank Act, the Federal Deposit Insurance Corp. (FDIC) and the Securities and Exchange Commission (SEC) are to lead a multi-agency effort to develop new standards for the secondary mortgage market.
The ICBA says that standards for debt-to-income ratios and the documentation and verification of borrowers' finances – among the considerations suggested by the Dodd-Frank Act – ‘are generally factors that community banks regularly use in mortgage underwriting.’
In his letter to the FDIC, SEC and other agencies, Fine urged the regulators to make the definition for QRMs as similar as reasonably possible to the ‘qualified mortgage’ definition used under the Truth In Lending Act. Per the Dodd-Frank legislation, the agencies are prohibited from making the QRM definition any broader than TILA's definition of ‘qualified mortgage.’