CFPB Issues Two Final Rules Related to QM Loans

On December 10, the Consumer Financial Protection Bureau (CFPB) issued two final rules, effective immediately, related to qualified mortgage (QM) loans, those deemed by lenders as stable loans based on the lender’s determination of the borrower’s ability to repay their mortgage before the loan is issued. The first rule, the General QM Final Rule, removes a requirement that the borrower’s debt-to-income ratio (DTI) be no more that 43 percent, replacing it with a limit that is based on the loan’s pricing as an indicator of a borrower’s ability to repay their loan. The second rule creates a new category for QMs, Seasoned QMs, that applies to mortgages held in loan portfolio and have met certain performance requirements over a 36-month seasoning period, providing lenders with a safe harbor from Ability-to-Repay (ATR) liability at the end of the 36-month seasoning period if the loan satisfies specific requirements. According to the CFPB, these new rules will support a “smooth and orderly transition” away from the Qualified Mortgage (QM) Patch—which exempts certain mortgage loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac (GSEs) from the 43 percent DTI requirement and is set to expire on July 1, 2021. It is estimated that approximately one-third of all GSE-backed loans exceed the 43 percent DTI threshold.

There has been some industry opposition to the CFPB rules. Commenting on the release of the two QM rules, the National Consumer Law Center issued a statement, arguing that these changes would protect lenders from legal liability and provide more avenues for new loans that are neither safe nor affordable, which would hurt lower-income Black families who have historically been the target of predatory loans.

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