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Breakfast With the Bankers and a Side Order of Ability to Repay Over Easy

Andrew T Berman
Jun 27, 2011

Last week, I had the pleasure of hanging with some of New York state’s mortgage banking elite at the Empire State Mortgage Bankers Association (ESMBA) Breakfast Meeting at a local Long Island dinner. At the meeting, ESMBA members and their guests, who are a collection of local mortgage banking heroes and top consultants, networked and listened to an analysis on how to deal with the Federal Reserve Board (FRB)’s proposed Ability-to-Repay rule intended to satisfy Dodd-Frank’s Ability-to-Repay requirements by Lender Compliance Group’s President, and featured editorial contributor for National Mortgage Professional Magazine, Jonathan Foxx. Jonathan pointed out that regulars admitted they failed at their job which is why we are dealing with the pendulum swinging too far back where we now face “regulators becoming underwriters.” Jonathan shared with the group a detailed chart with “Highlights of the Proposed Ability-to-Repay Rules” (e-mail Jonathan here to request a copy of the chart). QM and QRM confusion I was shocked to see that, in a room of some of the brightest minds in mortgage banking in the northeast, there were many who still didn’t understand the difference between qualified residential mortgages (QRMs) which deals with risk retention and securitization and qualified mortgages (QMs) which addresses the safe harbor of compliance on determining a consumer’s ability to repay a mortgage under Regulation Z. “A 'QM,'” Jonathan said, “is a loan that lacks risk features.” Stated loans, obviously would be a problem in QMs. Jonathan later said that these new crop of regulations is part of the “gradual nationalization of underwriting guidelines.” The problem is that Jonathan points out, “regulators don’t move at the same pace as the marketplace.” Get active! Going back to QRM, ESMBA President and President & CEO of Continental Home Loans, Michael McHugh pointed out that “Five percent is more money that we make (on a mortgage). Regulators and legislators don’t understand that. It’s our duty to keep the regulators and legislators informed about the nuances of the mortgage business." Bonnie Nachamie pointed out that, “Your congressmen are laymen and need to understand in real terms what the impact of legislation means to their constituents. Talk to them in terms of the problems your employees are facing with borrowers.” Missed opportunity? The one thing that I really wanted to point out is that this event, as well as other event put on the the ESMBA. This event was a great networking opportunity missed for most area mortgage professionals. There was only 30 or so attendees that paid either $18 or $25 as a member or non-member respectively. This includes breakfast, a two-hour presentation from a mortgage banking consultant that charges hundreds an hour, and a priceless networking opportunity. Be it the ESMBA or the NYAMB, make sure you are involved.   ESMBA Counsel Neil Garfinkel Esq. from Abrams Garfinkel Margolis Bergson, Jonathan Foxx from Lenders Compliance Group and ESMBA President Michael McHugh from Continental Home Loans Inc.   Guest speaker and compliance expert Jonathan Foxx discusses the differences between QMs and QRMs during the June ESMBA Meeting   ESMBA President Michael McHugh addresses attendees of the June ESMBA meeting   ESMBA Counsel Neil Garfinkel from Abrams Garfinkel Margolis Bergson LLP welcomes attendees to the June ESMBA Meeting  
Jun 27, 2011