(March 12, 2021) NASCUS also this week published a summary of CFPB’s proposal to delay the general “qualified mortgage” loan proposal, which would push the mandatory compliance date back by 15 months to Oct. 1, 2022.
The summary is available to members only.
Last week, the bureau issued the notice of proposed rulemaking (NPRM) to delay the rule, which was only finalized in December. Under the previous rule (the one on the books before the December rule was finalized), the requirement for general QM loans was that the borrower’s debt-to-income ratio (DTI) not exceed 43%.
Under the new rule adopted in December, which was slated to take effect July 1 but is proposed to be delayed to next year, a price-based approach was installed for limiting lending in replacement of the specific 43% DTI limit after determining that a loan’s price is a strong indicator of a consumer’s ability to repay.
Acting Director Uejio said last week that extending the compliance date would ensure that homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.
The agency noted that if the proposal is finalized, a number of things would remain in place. That is: the old, DTI-based general QM definition; the new, price-based General QM definition; and the GSE Patch (unless the GSEs exit conservatorship prior to Oct. 1, 2022) would all remain available as long as the lender received the consumer’s application prior to Oct. 1, 2022.
Comments on the proposal are due April 5.
(March 5, 2021) The mandatory compliance date of the general qualified mortgage (QM) final rule would be delayed 15 months (from July 1 to Oct. 1, 2022) under a proposal issued this week by CFPB.
In a release, the agency said it has issued a notice of proposed rulemaking (NPRM) to delay the rule, which was only finalized in December under former Director Kathleen Kraninger.
Under the previous rule, the requirement for general QM loans was that the borrower’s debt-to-income ratio (DTI) not exceed 43% with a new requirement of a limit based on the loan’s pricing. Under the new rule adopted in December, which was slated to take effect July 1 but is proposed to be delayed to next year, a price-based approach was installed for limiting lending in replacement of the specific 43% DTI limit after determining that a loan’s price is a strong indicator of a consumer’s ability to repay.
CFBP Acting Director Dave Uejio, in a release, stated that extending the compliance date will ensure that homeowners struggling with the financial impacts of the COVID-19 pandemic have the options they need.
“At a time when so many consumers are struggling and at risk of losing ground, particularly Black and Hispanic consumers, we need to do all we can to help people stay in their homes and to ensure the availability of responsible, affordable mortgages,” Uejio said. “In proposing to extend the date by which lenders must comply with the CFPB’s new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship.”
The agency also said extending the mandatory compliance date of the general QM final rule would allow lenders more time to offer QM loans based on the homeowners’ debt-to-income (DTI) ratio, and not solely based on a pricing cut-off.
“Extending the compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac,” CFPB said.
CFPB noted that if the proposal is finalized, a number of things would remain in place. That is: the old, DTI-based general QM definition; the new, price-based General QM definition; and the GSE Patch (unless the GSEs exit conservatorship prior to Oct. 1, 2022) would all remain available as long as the lender received the consumer’s application prior to Oct. 1, 2022.
Comments on the proposal are due April 5.
LINK:
CFPB Proposes Delay of Mandatory Compliance Date for General Qualified Mortgage Final Rule
(March 5, 2021) Saying he looks forward to approaching with an open mind the mission of the CFPB, director nominee Rohit Chopra told a Senate panel this week that fair and effective oversight of the mortgage market can promote a “resilient and competitive financial sector” while also addressing racial inequities.
Testifying before the Senate Banking Committee during a hearing on his nomination, Chopra said during the last economic crisis of 10 years ago, “we saw how unlawful and avoidable foreclosures proved to be catastrophic in cities, small towns, and rural areas alike, contributing to deeper social divisions and inequities.”
He said the country again faces “an important test to ensure that troubles in the housing market do not sabotage the recovery of our local economies.”
During questions and answers, Chopra said he also has an open mind about changes to qualified mortgage (QM) rules. He said he would look to what the statute says and what Congress’ goals are as the bureau reviews the rules. (See additional story, below.)
Last week, Acting Director Dave Uejio released a statement that the agency is considering revising or outright revoking the “seasoned QM” rule (which applies to portfolio loans meeting certain performance requirements over a 36-month seasoning period, including having no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days). The bureau also said it “expects to shortly issue” a proposal that would delay the July 1 mandatory compliance date for the general QM rule.
Chopra, during his appearance before the panel, said the bureau won’t dictate financial policy. When it comes to QM, he said, “it is important that we balance the consumer protections that Congress has put into place with access, including for rural and other areas.”
LINK:
Rohit Chopra, opening statement before Senate Banking committee (March 2, 2021)
(Dec. 11, 2020) Two final rules related to “qualified mortgages” (QMs) – one installing a limit on lending based on a loan’s pricing, and the second creating a “seasoned QM” – were released Thursday by the CFPB.
The final rules, the agency said, will “support a smooth and orderly transition away” from the so-called “QM Patch,” which is slated to expire July 1, 2021. The patch covers loans issued by government-sponsored enterprises (GSEs) Federal National Mortgage Association, (Fannie Mae) and the Federal Home Loan Mortgage Corp. (Freddie Mac), most of which are now considered QMs. After July 1, those loans will not automatically be given QM status.
In a release, CFPB said the first of the two rules will replace the current requirement for general QM loans that the borrower’s debt-to-income ratio (DTI) not exceed 43% with a new requirement of a limit based on the loan’s pricing. The second of the rules will establish the “seasoned QM,” which would apply to portfolio loans meeting certain performance requirements over a 36-month seasoning period, including having no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days.
The bureau said it adopted the price-based approach for limiting lending in replacement of the specific 43% DTI limit after determining that a loan’s price is a strong indicator of a consumer’s ability to repay. The bureau called it “a more holistic and flexible measure of a consumer’s ability to repay than DTI alone.” Additionally, CFPB said, conditioning QM status on a specific DTI limit “could impair access to responsible, affordable credit.”
The “seasoned QM” rule, CFPB said, creates a new category 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.
A loan becomes eligible as a seasoned QM, the bureau stated, when as a first-lien, fixed-rate loan it has no balloon payments and meets certain other product restrictions. As under the general QM final rule, the bureau said, the creditor must also consider the consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, “and debts and verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts,” the bureau said.
The loan must also “season” by meeting certain performance requirements at the end of the seasoning period, CFPB said. Specifically, according to the bureau, 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.
Both rules will take effect 60 days after publication in the Federal Register. The first rule (the general QM final rule) will have a mandatory compliance date of July 1, 2021. However: between the general QM final rule’s effective date and mandatory compliance date, the bureau said, 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, the bureau said.
LINKS:
General QM final rule