Update from the Agencies and Informal Notes QM; Lender Updates

With recent changes in QM/ATR rules along with intolerance for any error which may impinge marketability or the ability to expeditiously foreclose, mortgage originators are facing a variety of increased risks.  Sure, lenders can create unspecific GAAP reserves, but those unspecific reserves are not tax deductible. To help mortgage bankers avoid staying up at night worrying about their secondary market/QM business risks and be able to reduce current taxable income, The Tomorrow Group and Wingspan Insurance Services have partnered to create SMART, the Secondary Market Assurance Reimbursement Trust, an innovative and highly tax-efficient solution that takes a proven captive concept and applies it to the mortgage banking business. These products neatly solve the tax inefficiencies of loan loss reserves and particularly help lenders involved with third party originations to efficiently manage counterparty risk. Servicers facing FHA and GSE curtailment risks or originators concerned about possible CFPB fines for HMDA and other errors hitting next year could find these approaches quite helpful in reducing current taxes and smoothing results for 2014 and 2015. Contact Tony Schweiger at or go to to schedule a conversation at the MBA convention (Wingspan Booth) or soon after the conference.

Speaking of QM, we’ve had some pretty big QM news this week. “The Agencies are issuing this statement to describe some general principles that will guide supervisory and enforcement activities with respect to entities within their jurisdiction as the Ability-to-Repay Rule takes effect in January 2014. In the Agencies’ view, the requirements of the Ability-to-Repay Rule and ECOA are compatible. ECOA and Regulation B promote creditors acting on the basis of their legitimate business needs. Viewed in this context, and for the reasons described below, the Agencies do not anticipate that a creditor’s decision to offer only Qualified Mortgages would, absent other factors, elevate a supervised institution’s fair lending risk.” Read it and weep, or read it and look for clarity, either way here it is.