The Consumer Financial Protection Bureau (the “CFPB”) is currently charged with defining a “Qualified Mortgage” (a “QM”). The federal banking agencies, the SEC, the FHFA and the Department of HUD are jointly charged with defining a “Qualified Residential Mortgage” (a “QRM”), and the QRM definition cannot be any broader than the QM definition. A narrowly defined QM/QRM could significantly restrict the availability of housing finance in the U.S.
The Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires that lenders generally not make residential mortgage loans to borrowers who cannot repay them, and lenders can satisfy this requirement by making QMs. The Dodd-Frank Act also requires that securitizers of asset-backed securities retain at least 5% of the credit risk of the relevant assets, but such risk retention requirement does not apply if the relevant assets are QRMs. The Dechert OnPoint available here further discusses the significance of the QM and QRM and the relevant issues to be considered in connection with crafting these definitions.