CFPB ISSUES NEW QM DEFINITION AND SEASONING PROVISIONS. WHAT DOES THIS MEAN FOR THE REAL ESTATE INDUSTRY?
T
he CFPB was previously thought to have missed a perfect chance to fix the QM rule once and for all. But this doesn’t mean they were not going to do it. On December 13, 2020, the Bureau issued two relatively welcome surprises. One, along with discarding the debt-toincome (DTI) ratio limit, the Bureau expanded its proposed general Qualified Mortgage (QM) to include loans up to 2.25 percentage points over the average prime offer rate. Mortgage lenders are allowed to adopt the new QM as early as 60 days from the publication of the rule (which is likely by late February 2021), though compliance will become mandatory from July 1, 2021. Secondly, the Bureau will begin allowing loans to season into a QM after 36 months of timely payments, as long as the loan isn’t sold more than once during that time and is not securitized. Elsewhere, the CFPB issued a separate final rule, confirming once and for all that the GSE Patch, which is a temporary QM category for loans eligible for purchase by the GSEs, would expire on the mandatory compliance date of the agency’s rule revising the general QM definition. Since 2014, in general terms, a closed-end residential mortgage loan could only constitute a QM if the borrower’s DTI did not exceed 43%, or if the loan were GSE-eligible. Since the GSE Patch was set to expire on January 10, 2021, the CFPB promised to rethink the 43% DTI requirement and offer a smooth and orderly transition to a post-Patch QM. Also, the Bureau decided to loosen up several of its proposals due to the public comments it received.
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THE POWER IS NOW MAGAZINE | FEBRUARY 2021
