Zen And The QM Mountain

*Zen and the QM Mountain*
**By Phil Hall**

new-PhilH***The other day, I was listening to an oldies radio station and I heard a song by the British singer/songwriter Donovan that had some of the most cryptic lyrics to float across the airwaves. The song was “There is a Mountain” and the tune’s chorus is the repetition of this sentence: “First there is a mountain…then there is no mountain…then there is.” Here’s what went through my head:

****Yes, even by the measurement of ‘60s psychedelic pop, that is a pretty groovy slice of enigma. But in researching the song’s background, I discovered that Donovan was channeling the observations of Zen Buddhist monk Qingyuan Weixin. According to the celebrated monk, we first see the world through the preconceived boundaries and limits set up by others. But when we realize that we are not seeing the world through honest eyes, we jettison our long-held concepts of what is around us. Through enlightenment, however, we can see the world through fresh eyes and truly understand what is before us.

****And I know what you’re thinking: what in the world does this have to do with mortgage banking? Well, let’s take the old Donovan tune and fashion it about the agitation surrounding the Qualified Mortgage (QM) rules that are scheduled to take effect on January 14.

****First, there is a mountain – and if you believe many people, it is a damn big mountain that will produce a crushing landslide. Patrick Barnard over at MortgageOrb (my former stomping grounds) wrote the other week that QM “will have a chilling effect on the industry, not only reducing the breadth of products in the marketplace, but also the number of small lenders, many of whom will simply exit the business – if only temporarily – for the purpose of avoiding compliance issues.”

****Oh, that is depressing, isn’t it? But that scenario will cause your blood pressure to spike only if you see the mountain through a preconceived erroneous view. Recall the second third of the Donovan lyric – “then there is no mountain” – and the view becomes somewhat different.

****If the industry subscribes to the opinion of QM as a death knell, it is being foolish. Admittedly, QM will not make life easier for the average mortgage originator. But who said life was supposed to be easy? Yes, the playing field changes with the new rules – or whatever tweaks the rules receive between now and their official implementation.

****But now that the field is changing, the challenge is simple: play to win or get off the field and let the other guys grab the victory. Will you view QM as a fence that will imprison your ability to originate home loans, or as a fence that can be leaped over as you pursue new business channels and search out new customers?

****And that takes us to the third part of the Donovan lyric – “then there is.” At a July conference sponsored by the National Association of Federal Credit Unions, Barry Stricklin, vice president of real estate lending at Tower Federal Credit Union in Laurel, Md., didn’t see anything chilling. Instead, he pointed to non-QM loans – which could make up one-quarter of home loans starting next January – and the potential opportunity they could present to the credit union lenders.

****“I’ve heard Bank of America say they aren’t going to make any non-QM loans, and I hope they do that,” said Stricklin to the conference audiences of credit union officers. “There is an opportunity here to fill that void. I’d encourage you to be part of that lending world that says you’ll do it. You shouldn’t be afraid to stand behind your underwriting.”

****Stricklin sees the mountain – from the mountaintop. And there’s no time for chilling effects when you are sweating out new revenue sources!

****Tony Garritano, the editor and publisher of this outlet, viewed QM in a column last week with wise words: “Fear not, just prepare.” Indeed, like many mountains around us, QM can seem very challenging. But with study and preparation, this mountain can be ascended and conquered.

****However, this can only be accomplished when you see the mountain for what it is – and when you jettison preconceived fears and turn a possible obstacle into a powerful opportunity.