CFPB: Two Final Rules to Promote Access to Responsible, Affordable Mortgage Credit

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The Consumer Financial Protection Bureau (Bureau) issued final rules related to qualified mortgage (QM) loans.

The Bureau has issued two rules related to QM loans.  The first final rule, the General QM Final Rule, replaces the current requirement for General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43 percent with a limit based on the loan’s pricing.  In the second final rule issued today, the Bureau creates a new category for QMs, Seasoned QMs.  

Another current category of mortgage loans that has been accorded QM status under the law are loans that meet the standards of the Government Sponsored Enterprises (GSEs).  Most mortgage loans are QMs pursuant to this provision, also known as “the Patch.”  However, the Patch will expire on the mandatory compliance date of the General QM Final Rule (July 1, 2021), or the date the GSEs exit conservatorship, whichever comes first.  The Bureau’s issuance of its two new rules today will support a smooth and orderly transition away from the Patch and maintain access to responsible, affordable mortgage credit upon its expiration.

Under the General QM Final Rule, a loan receives a conclusive presumption that the consumer had the ability to repay if the annual percentage rate does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set.  A loan receives a rebuttable presumption that the consumer had the ability to repay if the annual percentage rate exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more but by less than 2.25 percentage points.  

The rule creates a new category of Seasoned QMs for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.

The loan must also “season” by meeting certain performance requirements at the end of the seasoning period.  Specifically, the loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period.  The creditor or first purchaser also generally must hold the loan on portfolio until the end of the seasoning period.

The General QM Final Rule and the Seasoned QM Final Rule will take effect 60 days after publication in the Federal Register.  The General QM Final Rule will have a mandatory compliance date of July 1, 2021.  Between the General QM Final Rule’s effective date and mandatory compliance date, there will be an optional early compliance period during which creditors will be able to use either the current General QM definition or the revised General QM definition.   The Seasoned QM Final Rule will apply to covered transactions for which creditors receive an application on or after the effective date.

To read the General QM final rule, click here.

To read the Seasoned QM final rule, click here.

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