CFPB Moves to Delay Qualified Mortgage Final Rule


Here we go again – the Consumer Financial Protection Bureau (CFPB) announced yet another delay in the final rulemaking related to the Qualified Mortgage definition.

What was expected to go into effect by July 1st, 2021 has now been pushed back until October 1st, 2022 in light of borrower struggles related to COVID-19.

Prior to this latest announcement, the General QM final rule would require lenders to offer QM loans based on a pricing cut-off as opposed to a fixed DTI limit.

Now we’re effectively standing still for another year-and-a-half while a new rulemaking period begins anew.

GSE Patch and DTI Limit to Remain…for Now

Simply put, the GSE patch and DTI limit, both of which were supposed to be phased out and replaced by a new pricing threshold based on the average prime offer rate (APOR), are being delayed.

This means lenders can continue to originate QM loans based on the homeowners’ debt-to-income (DTI) ratio, or lean on the GSE Patch, which provides QM status to loans as long as they’re eligible for sale to Fannie Mae or Freddie Mac.

The move, or lack thereof, is intended to ensure there are affordable lending options for homeowners during this period of uncertainty resulting from the ongoing pandemic.

“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,” said Bureau Acting Director David Uejio in a press release.

The CFPB went on to say that nearly three million American homeowners are behind on their mortgages thanks to COVID-19.

And minority communities have seen the heaviest job losses, while still struggling to recover from the Great Recession a decade ago.

Delay to Rule Changes Intended to Provide Certainty During Uncertain Times

While there are numerous forbearance options and foreclosure moratoriums in place to help keep borrowers in their homes, those initiatives will soon come to an end.

“The CFPB believes that an extension of the mandatory compliance date may help ensure stability and access to affordable, responsible credit in the mortgage market.”

In other words, they don’t want to shake things up at a time when there’s so much uncertainty in the housing market and wider economy.

It’s understandable, but it may also be making things difficult for mortgage companies, specifically non-QM lenders that need clarity going forward.

The bigger question is whether these proposed changes to the QM rule will eventually go through, or if their delay is synonymous with their demise.

Either way, it shows you just how difficult policy change is when it comes to home loans, and how much reliance we have on the government in what is supposed to be a private industry.

If this notice of proposed rulemaking (NPRM) is finalized, the old DTI-based General QM definition, new price-based definition, and the GSE Patch (unless GSEs exit conservatorship before October 1st, 2022) would all remain available if the lender receives the consumer’s application prior to October 1st, 2022.

Comments on the NPRM must be received on or before April 5th, 2021.

Update: On April 27th, 2021, the CFPB formally delayed the mandatory compliance date to October 1st, 2022.

However, it noted that availability of the GSE Patch after July 1st, 2021 could be limited due to recent revisions to the Preferred Stock Purchase Agreements entered into by the Treasury and FHFA.

(photo: Jordiet)

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