Pittenger calls for delay of qualified mortgage rules

Republican Rep. Robert Pittenger called Wednesday for a one-year delay of new mortgage rules designed to make sure homebuyers are able to repay their mortgages.

Pittenger, whose district includes part of Mecklenburg County, made the request shortly after noon in House of Representatives chambers. His request comes just two days before the rules issued by the Consumer Financial Protection Bureau go into effect.

“This rule is going to have a devastating effect on the housing industry,” Pittenger said. "Fifty percent of the loans made in 2013 will not be made for 2014 with these guidelines."

He called for the delay "to allow Congress to improve it."

The so-called ability-to-repay and qualified-mortgage requirements stem from the 2010 Dodd-Frank Act and are designed to prevent the kind of risky loans that contributed to the recent financial crisis.

The ability-to-repay rule requires lenders to examine eight types of financial information about a borrower, including income and debts, to ensure they can repay a mortgage.

Borrowers will face even more requirements if a lender chooses to make a "qualified" mortgage, which requires loans to meet additional measurements. Under the general category of qualified mortgages, a borrower’s debt-to-income ratio cannot exceed 43 percent, although that does not apply to mortgages eligible for purchase by Freddie Mac or Fannie Mae or to be insured by government agencies under a provision set to run until 2021.

Even critics of the rules say the changes won’t feel all that different, as lenders have changed their practices in the wake of the financial crisis. But the rules will make it tougher for low-income and first-time homebuyers, as well as those in rural areas, to get a mortgage, critics say.

Pittenger, who serves on the House Financial Services Committee, told the Observer in an interview last month that the rules will restrict access to loans because lenders will not want to make a non-qualified mortgage. Lenders don’t have to make qualified mortgages under the new rules, but they receive certain legal protections from future borrower lawsuits if they do. Pittenger said lenders will want the protections and, therefore, make only qualified mortgages.

"They don't want to be sued," he said in the December interview.

The rules will hurt the housing industry, which is needed to "pull us out of this recession," he said.

One concern critics have raised about the ability-to-repay rule is that could make it hard for some first-time borrowers to qualify for adjustable-rate mortgages. That's because, under the rules, the highest interest rate expected over the life of the loan must be considered when a lender is calculating a borrower’s debts.

Critics have also said borrowers in outlying parts of the Charlotte region could be especially hurt by the new rules. In those areas, loan amounts tend to be lower, which will make it hard for points and fees to stay within new limits. Lenders might not charge underwriting fees as a means to help borrowers meet points and fee thresholds, but they might ask for a higher interest rate to compensate, critics say.

Pittenger, a Dodd-Frank critic, said the new mortgage rules go too far.

"We have an over-regulated financial market," he said. "The pendulum has swung way too far. Yes, we need some regulations, but there's been an over-reaction by Washington.

"Let the market work. The best thing the government can do is get out the way."

After Pittenger's speech, the North Carolina Public Interest Research Group praised the new mortgage rules in a press release.

“The CFPB is getting results for consumers,” Kalila Zunes-Wolfe, a consumer advocate with NCPIRG, said in a statement. “These new rules are designed to help people safely buy affordable homes and then to keep them.”