The CFPB recently issued a policy statement addressing the rules finalized near the end of former Director Kraninger’s tenure that amend the Regulation Z ability to repay rule/qualified mortgage (QM) requirements to replace the strict 43% debt-to-income (DTI) ratio basis for the current general QM with an annual percentage rate (APR) limit, and to create a new seasoned loan QM. As previously reported, Acting Director Uejio generated speculation regarding the fate of the rules, which each have a March 1, 2021 effective date, when he made public a statement that he sent to the staff of the CFPB’s Division of Research, Markets, and Regulations (RMR) outlining his regulatory priorities and directing staff to “explore options for preserving the status quo with respect to QM and debt collection rules.”
While the CFPB will not change the March 1, 2021, effective date of the rules, in the policy statement the CFPB advises that it:
- Expects to issue shortly a proposed rule that would delay the July 1, 2021, mandatory compliance date for the new general QM rule;
- Will consider at a later date whether to initiate a rulemaking to reconsider other aspects of the new general QM rule; and
- Is considering whether to initiate a rulemaking to revisit the seasoned loan QM rule.
Currently, (1) both the current general QM based on a 43% DTI ratio and the temporary QM based on a loan being eligible for sale to Fannie Mae or Freddie Mac, which is commonly referred to as the “GSE Patch,” remain available for applications received by creditors through June 30, 2021, (2) the new general QM becomes available for applications received on or after March 1, 2021, and (3) for applications received on or after July 1, 2021, the new general QM remains available and the current general QM and the GSE Patch are no longer available. The CFPB advises in the policy statement that if it delays the July 1, 2021 mandatory compliance date for the new general QM rule, creditors would be able to originate loans under the current and new general QM rules until the delayed mandatory compliance date, and it anticipates that the GSE Patch will remain available until the delayed mandatory compliance date, unless Fannie Mae and Freddie Mac exit conservatorship before then.
In a related blog post, Acting Director Uejio notes that because of the economic hardship and uncertainty caused by the COVID-19 pandemic, the CFPB must do all it can to protect homeowners and promote stability in the housing market. He also advised that the CFPB plan to delay the July 1, 2021, mandatory compliance date for the new general QM rule is intended “to ensure consumers have the options they need during the pandemic and financial crisis it has caused, as well as to provide maximum flexibility to the market . . . .” He also notes that “[a]n extension of the compliance deadline would allow lenders more time in which they could make QM loans based on a debt-to-income ratio or whether the loans are eligible for sale to Fannie Mae or Freddie Mac, and not just a pricing cut off.”
With regard to the seasoned loan QM rule, the CFPB advises in the policy statement that if it decides to revisit the rule, it expects that it will consider in that rulemaking whether any potential final rule revoking or amending the rule should affect covered transactions for which an application was received during the period of time from March 1, 2021, until the effective date of the final rule. This statement likely will have a chilling effect on companies that intended to rely on the seasoned loan QM rule for applications received on or after March 1, 2021.
The policy statement is scheduled for publication in the February 26, 2021, Federal Register. In addition to issuing the policy statement, the CFPB also issued a revised version of the Ability-to-Repay and Qualified Mortgage Rule Small Entity Compliance Guide, which reflects the new general QM and seasoned loan QM rules.