The CFPB recently issued a final rule delaying the mandatory compliance date for the new general qualified mortgage (QM) rule based on an annual percentage rate (APR) limit from July 1, 2021 to October 1, 2022. The final rule is effective on June 30, 2021. The CFPB also issued an executive summary of the final rule.

In December 2020, the CFPB issued the new general QM rule to replace the original general QM rule based on a strict 43% debt-to-income (DTI) ratio. At the same time the CFPB also issued a seasoned loan QM rule. Both rules became effective on March 1, 2021, although because of the 36 month seasoning period, the seasoned loan QM rule did not have any immediate impact.

Based on the new general QM rule’s original mandatory compliance date of July 1, 2021, for applications received on or before June 30, 2021, creditors could rely on the original general QM rule, the new general QM rule, or the temporary QM rule based on a loan being eligible for sale to Fannie Mae or Freddie Mac (often referred to as the “GSE Patch”), as long as Fannie Mae and Freddie Mac did not exit conservatorship. Among those three QM rules, for applications received on or after July 1, 2020, only the new general QM rule would be available.

The CFPB proposed to delay the mandatory compliance date from July 1, 2021 to October 1, 2022, so that the original general QM rule, new general QM rule, and GSE Patch QM rule would all be available for applications received on or before September 30, 2022 (although the GSE Patch QM rule would end if Fannie Mae and Freddie Mac exited conservatorship). The CFPB made the following statement regarding the rationale for the proposal:

The COVID-19 pandemic has left almost 3 million American homeowners behind on their mortgages. Black and Hispanic communities, in particular, have still not recovered from the impact of the Great Recession and bear the heaviest burden of job losses under COVID-19. Forbearance plans and foreclosure moratoriums have helped many homeowners stay in their homes, but those interventions may end before either the broader economy has recovered from the impact of the pandemic or the housing market has reached a new equilibrium. 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.

Based on other actions, however, the goal of the CFPB may not be fully realized. In January 2021 the Preferred Stock Purchase Agreements (PSPAs) regarding Fannie Mae and Freddie Mac were amended. Pursuant to the amendments, with regard to the original general QM rule, the new general QM rule, and the GSE Patch QM rule, on or after July 1, 2021, Fannie Mae and Freddie Mac could only purchase new general QM rule loans. The proposal of the CFPB to delay the mandatory compliance date for the new general QM rule to October 1, 2022, raised the issue of whether the PSPAs would be further amended to continue to provide for the purchase of original general QM rule loans and GSE Patch QM rule loans after July 1, 2021, if the CFPB finalized the proposed delay.

As previously reported, on April 8, 2021, Fannie Mae and Freddie Mac announced that for loans with applications received on or after July 1, 2021, they will purchase new general QM rule loans, and not original general QM rule loans or GSE Patch QM rule loans. As a result, for applications received on or after July 1, 2021: (1) the original general QM rule loans may still be originated, but they will not be eligible for sale to Fannie Mae or Freddie Mac without further action to amend the PSPAs, and (2) because GSE Patch QM loans receive QM status based on the loans being eligible for sale to Fannie Mae or Freddie Mac, the GSE Patch QM rule will in effect no longer be available without further action to amend the PSPAs, or an amendment of the rule by the CFPB.

Various industry representatives submitted comments opposing the proposed delay of the mandatory compliance date, and even various consumer representatives submitted comments opposing the proposed delay or indicating that they did not believe that a delay was necessary. It appears many parties opposing the delay believe the actual, or a significant, reason for the proposed delay is to provide the CFPB with time to reassess and amend the new general QM rule. As previously reported, in February 2021 the CFPB issued a policy statement in which it advised that it intended to propose a rule to delay the mandatory compliance date of the new general QM rule, and that it will consider at a later date whether to initiate a rulemaking to reconsider other aspects of the new general QM rule. In the preamble to the final rule delaying the mandatory compliance date, the CFPB advises that it plans to evaluate the new general QM rule, and again states that it will consider at a later date whether to initiate another rulemaking to reconsider other aspects of the general QM loan definition.