July 07, 2014

Meyster urges QM fixes to 'small creditor,' DTI

July 8, 2014 – NAFCU on Monday urged CFPB to revise its qualified mortgage rules to allow a cure or correction mechanism for debt-to-income ratio overages and to expand the limit for the small-creditor exemption.

Under the QM rules, a consumer must have a debt-to-income ratio of no more than 43 percent. Angela Meyster, NAFCU's regulatory affairs counsel, recommended in a comment letter that CFPB allow a cure or correction for DTI overages if a credit union:

  • made an unintentional error in calculating a consumer's debt, income or DTI ratio; or
  • stopped documenting a consumer's debt or income because the credit union believed it had sufficient proof that the consumer had met the 43 percent DTI limit.

Meyster said allowing a cure for lenders could also help credit union members. "This change would also be beneficial to consumers in that it would stop further contraction of the lending market," she wrote.

Meyster also recommended that the bureau expand the small-creditor exemption, currently allowed just for credit unions with less than $2 billion in assets and making no more than 500 mortgages a year. The "vast majority of credit unions of that asset size, and even those significantly smaller [than $2 billion], typically originate more than 500 mortgages a year," she wrote.

"This 500-transaction limitation is not only arbitrary, but it also does not comport with the realities of many small credit unions' lending activities," Meyster wrote. "Based on our research, and consistent with our prior communications to the CFPB, NAFCU believes the appropriate ‘small creditor' mortgage threshold should be 1,000 mortgages per year."