CFPB Delays Mandatory Compliance Date for New General Rule on Qualifying Mortgages | Ballard Spahr LLP
The CFPB recently published a final rule delay the mandatory compliance date for the new general rule of qualifying mortgage (QM) based on an annual percentage rate (APR) limit July 1, 2021 to October 1, 2022. The final rule comes into effect on June 30, 2021. The CFPB has also issued a abstract of the final rule.
In December 2020, the CFPB published the new general rule of quality management to replace the original general rule of quality management based on a strict debt-to-income ratio (DTI) of 43%. At the same time, the CFPB also issued a seasoned loan quality management rule. Both rules came into effect on March 1, 2021, although due to the 36-month seasoning period, the seasoned loan quality management rule did not have an immediate impact.
Based on the initial mandatory compliance date of the new general rule QM of July 1, 2021, for claims received on or before June 30, 2021, creditors could rely on the original general rule QM, the new general rule QM or the temporary QM rule based on a loan that can be sold to Fannie Mae or Freddie Mac (often referred to as the “GSE patch”), as long as Fannie Mae and Freddie Mac have not left the trusteeship. Among these three quality management rules, for requests received as of July 1, 2020, only the new general quality management rule would be available.
CFPB offers to extend the mandatory compliance date from July 1, 2021 to October 1, 2022, so that the original general rule QM, new general rule QM and rule GSE Patch QM are all available for applications received by September 30 at the latest 2022 (although the GSE Patch QM rule would end if Fannie Mae and Freddie Mac left guardianship). The CFPB made the following statement regarding the rationale for the proposal:
The COVID-19 pandemic has left nearly 3 million U.S. homeowners 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 moratoria have helped many homeowners stay in their homes, but these interventions may end before the economy in general 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 can help ensure stability and access to affordable and responsible credit in the mortgage market.
However, based on other actions, the CFPB objective may not be fully achieved. In January 2021, the Preferred Share Purchase Agreements (PESAs) for Fannie Mae and Freddie Mac were amended. As per the changes, with respect to the original QM general rule, the new QM general rule and the GSE Patch QM rule, as of July 1, 2021, Fannie Mae and Freddie Mac could only purchase new loans to the rule. general QM. CFPB’s proposal to postpone the mandatory compliance date for the new general quality management rule to October 1, 2022 raised the question of whether the PSPAs would be further amended to continue to provide for the purchase of the original loans from the general rule of quality management and GSE patch. Loans under the QM rule after July 1, 2021, if the CFPB has finalized the proposed delay.
Like before 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 QM General Rules Loans, not QM General Rules Loans from origin or loans to GSE Patch QM rules. Accordingly, for applications received on or after July 1, 2021: (1) Original general rule QM loans may still be issued, but they will not be eligible for sale to Fannie Mae or Freddie Mac without further action. to modify PSPAs. , and (2) since GSE Patch QM loans are given QM status based on loans eligible for sale to Fannie Mae or Freddie Mac, the GSE Patch QM rule will in fact no longer be available without further action to modify the PSPAs. , or a modification of the rule by the CFPB.
Various industry representatives submitted comments opposing the proposed extension 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 that many parties opposed to the delay believe that the real or significant reason for the proposed delay is to give the CFPB time to re-evaluate and modify the new general rule of quality management. Like before reported, in February 2021, the CFPB issued a policy statement in which it informed that it intended to propose a rule to delay the mandatory compliance date of the new general quality management rule, and that it will examine at a later date whether to initiate a regulation to reconsider other aspects of the new general rule of quality management. In the preamble to the final rule postponing the mandatory compliance date, the CFPB informs that it is considering evaluating the new general quality management rule and again declares that it will consider at a later date whether it is appropriate to ‘initiate another regulation to reconsider other aspects of the general rule. Definition of QM loan.