The “government-sponsored enterprise” (GSE) patch – which gives mortgages guaranteed by Freddie Mac and Fannie Mae “qualified mortgage” (QM) status – will be extended until a final rule is approved that amends the general QM loan definition in Regulation Z, CFPB said this week.
In a release, the bureau said a final rule amending the QM loan definition would contain a “mandatory compliance date.” The GSE patch was scheduled to expire Jan. 10. The bureau also said it is not amending the provision in Regulation Z stating that the GSE Patch will expire if Fannie Mae and Freddie Mac exit conservatorship.
In June, CFPB issued a proposal to amend the general QM loan definition, which was also the day the bureau proposed to extend the GSE Patch. CFPB said it is now developing a final rule amending the general QM loan definition and is planning to issue it at a later date.
This week’s action came in the form of a final rule from the agency. CFPB said the rule represents the steps being taken by the bureau to “ensure a smooth and orderly transition away from the GSE patch and to maintain access to responsible, affordable mortgage credit upon its expiration.”
“Further, the Bureau is taking this action to ensure that responsible, affordable credit remains available to consumers who may be affected if the GSE patch expires before the mandatory compliance date of a final rule amending the general QM loan definition,” CFPB said.
Loans covered under the GSE patch are eligible for QM status even if the debt-to-income (DTI) ratio exceeds 43%, CFPB said. “Last year, the Bureau released an assessment of the ATR/QM Rule and found that GSE Patch loans represent a large and persistent share of mortgage originations,” the bureau stated. In fact, CFPB stated, absent regulatory action keeping the GSE patch intact (at least for now), an estimated approximately 957,000 mortgage loans would be affected by the expiration of the patch. The agency said that, after the GSE patch expires, some of these loans would either not be made or would be made but at a higher price.
(This development, as well as the bureau’s HMDA chart, is catalogued on NASCUS’ “Latest CFPB Updates” on the NASCUS website; see the link below to keep up with all of the latest developments, via NASCUS, from the bureau.)