BROUGHT TO YOU BY THE LETTER “Q”:The Qualfied Mortgage and

Qualfied Residential Mortgage

Joseph Pigg, Vice President and Sr. Counsel

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TWO STANDARDS: ONE GOAL

• QM AND QRM both intended to improve underwriting

• QM sets outer boundaries of what is an acceptable loan (red light/green light)

• QRM provides exemption from risk retention

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QRM IS A SUBSET OF QM – as proposed a much smaller subset

qrm

QRM

QM

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GSE’s are exempt from QRM (while in conservatorship

• GSE exemption necessary to avoid disruption of mortgage market

• Justified due to full backing of federal government

• Makes it much harder to ever resolve GSE status

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QM/QRM and GSE standards should be more closely aligned

• .

aRevised QRM (and GSE standard)

QM

aba.com |1-800-BANKERS

Aligning QM/QRM and GSE standards makes sense

• QM still sets boundaries of acceptable loans – must be safe, with traditional features and with a proven ability to be repaid

• QRM is a subset – safe, traditional, repayable and with additional borrower qualifications –i.e.down payment

• GSE standards should be same as QRM – loans safe enough to gain full backing of taxpayers should also be safe enough to be sold to investors without additional risk retention