Removing Barriers Blog

CFPB Releases NPRMs on QM & the GSE Patch
Posted June 22, 2020 by CUNA Advocacy

The CFPB issued two Notices of Proposed Rulemaking (NPRMs) related to the forthcoming expiration of the temporary Government-Sponsored Enterprises (GSE) patch. According to the Bureau, the proposals are intended to transition away from the Temporary GSE patch QM (qualified mortgage) loan definition “while maintaining access to responsible, affordable mortgage credit upon its expiration.” 

In the first proposal, the Bureau intends to amend the General QM definition in Regulation Z to replace the DTI (debt-to-income) limit with a price-based approach.  The Bureau stated it is proposing a price-based approach because it preliminarily concludes that a loan’s price, as measured by comparing a loan’s annual percentage rate to the average prime offer rate for a comparable transaction, is a strong indicator and more holistic and flexible measure of a consumer’s ability to repay than DTI alone.  For eligibility for QM status under the General QM definition, the Bureau is proposing a price threshold for most loans as well as higher price thresholds for smaller loans, which is particularly important for manufactured housing and for minority consumers.  The NPRM also proposes that lenders take into account a consumer’s income, debt, and DTI ratio or residual income and verify the consumer’s income and debts.  

In the second proposal, the Bureau intends to extend the GSE Patch to expire upon the effective date of the first proposal’s amendment of the General QM loan definition.  The patch is currently scheduled to expire in January 2021.

CUNA has been actively engaged on necessary reforms to the QM Rule and previously recommended the CFPB eliminate the DTI ratio requirement from the general QM category.