This post grows out of two working papers (downloadable here and here) that Professor Ayres wrote with Joshua Mitts, a former student who is now working at Sullivan & Cromwell.

On Friday, January 10th, the Consumer Financial Protection Bureau’s “qualified mortgage” rule went into effect.  This rule is designed to put an end to the risky lending practices that led to the financial crisis.  But a simpler rule could better assure borrowers’ ability to repay and simultaneously create greater repayment flexibility.

The purpose of the QM rule is to help assure that borrowers have sufficient monthly income to make … Read more