Removing Barriers Blog

CFPB Amends Regulation Z to Extend GSE QM Patch
Posted October 22, 2020 by CUNA Advocacy

Earlier this week, the Consumer Finance Protection Bureau (CFPB or the Bureau) issued a final rule extending the sunset date for the GSE Qualified Mortgage (QM) Patch.  The GSE QM Patch temporarily defines certain mortgages eligible for purchase by Fannie Mae and Freddie Mac as QMs that receive liability protections against claims that the loans were originated in violation of the Truth in Lending Act. This final rule amends Regulation Z to replace the previous January 10, 2021 sunset date of the GSE QM Patch with an expiration on the mandatory compliance date of final amendments to the General QM loan definition, which is being determined through a separate rulemaking.

In this final rule, the Bureau links the new expiration of temporary GSE QM loans to the “mandatory compliance” date established in the anticipated revisions to the General QM definition instead of the Genera QM’s proposed “effective date.” This is particularly important because that effective date was previously described as occurring as soon as April 2021.  As a result of this change, the Bureau can adopt a later General QM compliance period that will allow for a more orderly transition for credit unions and other lenders to update their business processes and information technology systems.

CUNA welcomes this development as responsive to our comments on the proposed rule.  As we stated in our letter, the extension is a “prudent and necessary action to ensure consumers’ continued access to affordable mortgage loans” but needs an “an extended and gradual transition period,” prior to expiration of the patch.  We reiterated these points in a related letter on the amendments to the General QM definition.  We are pleased to see that this final rule creates space for such a transition and will continue to advocate for a reasonable mandatory compliance date so credit unions have sufficient time to adapt to the new General QM.  

Please contact Damon Smith with any questions.