Consumer Finance Insights
March 2, 2021

CFPB to Delay, Revisit Qualified Mortgage Rules

The Consumer Financial Protection Bureau (CFPB) issued a statement on February 23, 2021 addressing compliance deadlines associated with qualified mortgage regulations completed under former Director Kathleen Kraninger.  In its statement, the CFPB said that it may amend or revoke the Seasoned Qualified Mortgage (QM) Final Rule and expects to issue a proposed rule that would delay the July 1, 2021 mandatory compliance date for its General QM Final Rule.  Both rules were to slated to take effect this week.

As previously discussed by Lender Law Watch, the CFPB issued a proposed rule to create a new category of loans known as “seasoned” qualified mortgages (Seasoned QMs).  This new category of qualified mortgages would require loans to meet certain performance standards over a 36-month seasoning period, after which the Seasoned QM loan would be entitled to the safe harbor of compliance with the ability-to-repay (ATR) requirements for residential mortgage loan origination under the Truth in Lending Act (TILA).  The CFPB issued the Seasoned QM Final Rule on December 10, 2020, and it was originally scheduled to take effect on March 1, 2021.

The CFPB, however, is now “considering whether to initiate a rulemaking to revisit the Seasoned QM Final Rule.”  If the CFPB decides to revisit the rule, “it expects that it will consider in that rulemaking whether any potential rule revoking or amending the Seasoned QM Final Rule should affect covered transactions for which an application was received during the period from March 1, 2021, until the effective date of such a final rule.”

In addition, the CFPB said in its statement that it “expects to issue shortly a proposed rule that would delay the July 1, 2021 mandatory compliance date of the General QM Final Rule,” also issued on December 10, 2020.  The General QM Final Rule relaxes certain underwriting requirements for a loan to earn general qualified mortgage status, replacing the requirement for General QM loans (i.e., that a consumer’s debt-to-income ratio (DTI) cannot exceed 43%) with a limit based on the loan’s pricing.  The CFPB deemed the new General QM Final Rule a more “holistic and flexible measure of a consumer’s ability to repay than DTI alone.”

According to its recent statement, lenders would be able to use “either the current General QM loan definition or the revised General QM loan definition for applications received during the period from March 1, 2021, until the delayed mandatory compliance date.”

The CFPB also indicated in its statement that the Temporary Government Sponsored Enterprise (GSE) QM loan definition, commonly referred to as the “GSE Patch,” would remain in effect until the new mandatory compliance date, or until the GSEs exited conservatorship prior to that date.  The GSE Patch exemption has allowed lenders to secure QM status for loans backed by Fannie Mae and Freddie Mac even if they exceeded a 43 percent debt-to-income cap that was required by CFPB rules from 2013, but that provision was due to expire this year.

The CFPB did not elaborate on the specific changes it might be contemplating for either the Seasoned QM Final Rule or the General QM Final Rule.  It remains to be seen how the new CFPB leadership will impact changes to these rules.

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