US Consumer Financial Protection Bureau in Process of Restructuring Regulation of the Residential Mortgage Market: Qualified Mortgage Rule Emerges as Critical Issue

July 31, 2012
The Dodd-Frank Act provides the U.S. Consumer Financial Protection Bureau with broad responsibility to regulate the residential mortgage finance industry. Among the CFPB’s most important actions may be its current rulemaking to define a “qualified mortgage” (QM) loan, which is part of a broader requirement intended to ensure in general terms that lenders make a reasonable and good faith determination that all applicants for a residential mortgage loan have the ability to repay the loan at the time it is made. Lenders can satisfy this requirement by making a QM loan or by making a non-QM that otherwise satisfies several underwriting requirements. This update discusses several issues raised for borrowers, lenders and the housing finance markets in general by the definition of a QM loan.