We previously reported on recent mortgage rulemakings that were finalized by the Consumer Financial Protection Bureau (CFPB or Bureau) late last year. Of the two final rules from the Bureau, one drastically simplifies the definition of a “qualified mortgage” (QM) (the General QM Final Rule), and the other provides an alternate pathway to QM safe harbor status for certain seasoned mortgage loans (the Seasoned QM Final Rule). Both of these final rules—with potentially major impacts on the housing market—were published in the Federal Register on December 29, 2020, with effective dates of March 1, 2021 (although the General QM Final Rule contains a mandatory compliance date of July 1, 2021).
We also previously reported on the Bureau’s February 23 statement that provided a status update and more specific guidance concerning the Bureau’s current and future plans for these QM rules.
In keeping with the February 23 statement, the Bureau issued a proposed rule on March 3 to delay the mandatory compliance date of the General QM Final Rule from July 1, 2021 to October 1, 2022. The previously-announced expiration of the Temporary GSE QM loan definition (which covers loans that are eligible for purchase or guarantee by Fannie Mae or Freddie Mac (the GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency (FHFA)), would also be extended and, under the proposed rule, would now expire upon the earlier of October 1, 2022 or the date the applicable GSE exits conservatorship.
The Bureau states that its proposal to extend the mandatory compliance date is driven by two primary factors. First, the Bureau seeks to ensure that homeowners struggling with the financial impacts of the coronavirus (COVID-19) pandemic have the options they need. Second, the Bureau seeks to ensure stability and access to affordable, responsible credit in the mortgage market.
Comments on the proposed rule must be received on or before April 5, 2021.
The Bureau proposes that a final rule based on this proposal be effective 60 days after publication in the Federal Register. The Bureau anticipates that this would make the final rule effective before the current July 1, 2021 mandatory compliance date.
Takeaways
- Under the proposal, the revised regulations would apply to covered transactions for which creditors receive an application on or after October 1, 2022. If the proposed rule is finalized as proposed, (a) the old, DTI-based General QM definition; (b) the new, price-based General QM definition; and (c) the GSE Patch (unless the GSEs exit conservatorship prior to October 1, 2022) would all remain available as long as the lender received the consumer’s application prior to October 1, 2022. Extending the mandatory compliance date of the General QM Final Rule would allow lenders more time to offer QM loans based on the homeowners’ debt-to-income (DTI) ratio, and not solely based on a pricing cutoff. In addition, extending the compliance date of the General QM Final Rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac.
- The proposal should help eliminate much of the mortgage market uncertainty concerning mortgage originations in the wake of the Biden administration and CFPB leadership transitions. The continuation of the Temporary GSE QM loan definition for the time being should also help prevent any potential marketplace disruption.
- This proposal would not make other changes to the General QM loan definition. The Bureau plans to evaluate the General QM Final Rule’s amendments to the General QM loan definition and will consider at a later date whether to initiate another rulemaking to reconsider other aspects of the General QM Final Rule.