Sixth, it addresses the likelihood of liability of ATR liability Third, it covers the civil liability to the CFPB for failing to verify ATR įourth, it covers private civil liability for ATR violations įifth, it covers the private civil damages for ATR violations Second, it covers the Qualified Mortgage safe harbor to the ATR requirement What matters is the lack of liquidity-meaning a secondary market-in non-QM loans, as lenders aren't going to want a lot of illiquid loans on their books, and that is a function of the GSEs' credit box, not CFPB regulation.īecause this post is REALLY long, here’s where it goes (yes, I feel like I'm doing one of those unwieldy 100+ page UFTA decisions, so I'm going to have a table of contents!):įirst, it gives the legal background on the Dodd-Frank Act ATR requirement Ultimately, I don't think ATR liability really matters in terms of availability of credit.

I invite those who would calculate this differently to weigh in in the comments-it’s quite possible that there are factors I have overlooked here, as this is a really preliminary analysis. Even with rounding up, that's 25 basis points to recover additional credit losses, which is not a big impact on credit availability.

Still, my back-of-the-envelope calculation suggests that it is quite low in terms of loss given default and could probably be priced in at around 10 basis points in additional cost for a portfolio with weighted average maturities (actual) of five years. (I note that all of this is my tentative readings of the statute we really don’t know how courts will interpret it, and others may see better readings than I do now.) Based on a preliminary analysis, I think this concern is overblown, and in this very long post I attempt to work through the potential liability for lenders that make non-Qualified Mortgages. I've blogged on aspect of QM before ( here, here, here, here, here, here, here, and here). There is a real concern that the Dodd-Frank Act’s mortgage reforms will reduce the availability of mortgage credit because lenders’ fear liability for making mortgage loans that fail to qualify as “Qualified Mortgages” (QM) and are thus potentially subject to an Ability-to-Repay (ATR) defense. One of the huge questions hanging over the mortgage market today is what will happen to access to credit for credit impaired or non-traditional borrowers.

Non qm mortgage