On March 3, 2021, the CFPB released a notice of proposed rulemaking (NPRM) which proposes to delay the mandatory compliance date of the final rule the agency previously issued on December 10, 2020, that revised the general Qualified Mortgage (QM) requirements (Revised General QM Rule). If finalized, the NPRM would move the mandatory compliance date for the Revised General QM Rule from July 1, 2021, to October 1, 2022.
Significantly, if the NPRM is finalized, it will permit lenders to offer consumers both QMs that: (1) meet the Current General QM Rule requirements (necessitating, among other factors, a QM to have a debt-to-income ratio not exceeding 43%, consistent with Appendix Q), and (2) meet the Revised General QM Rule requirements (necessitating, among other factors, a QM to meet specified pricing thresholds). Under the NPRM, loan applications for QMs under the Current General QM Rule may be received beginning March 1, 2021, until the new mandatory compliance date of October 1, 2022, and loan applications for QMs under the Revised General QM Rule may be received beginning March 1, 2021, currently without a specified end date.
Also, by extending the mandatory compliance date for the Revised General QM Rule, the NPRM, if finalized, would permit lenders to also offer consumers a third type of QM, the “Temporary GSE Patch QM” — generally defined, among other factors, as a loan eligible for purchase or securitization by Fannie Mae or Freddie Mac – for a longer period of time. Expiration of the Temporary GSE Patch QM has been tied to the Revised General QM Rule’s mandatory compliance date. Under the NPRM, loan applications for Temporary GSE Patch QMs may be received beginning March 1, 2021, until the new mandatory compliance date of October 1, 2022, or until the GSEs exit conservatorship, if prior to such date.
In a press release announcing the NPRM, the Acting Director of the CFPB, David Uejio, explained that by “proposing to extend the date by which lenders must comply with the CFPB’s new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship.” The NPRM similarly emphasized the need to “ensure access to responsible, affordable mortgage credit and to preserve flexibility for consumers, particularly those affected by the COVID-19 pandemic.”
The NPRM noted that the CFPB plans to consider at a later date whether to initiate a rulemaking to reconsider other aspects of the Revised General QM Rule, beyond the mandatory compliance date.
Any comments in response to the NPRM must be received by the CFPB by April 5, 2021. As part of the NPRM, the CFPB proposed that a final rule based on the proposal would be effective 60 days after publication in the Federal Register, and noted that it anticipates that this would make the final rule effective before the current July 1, 2021, mandatory compliance date.
In an earlier statement, the CFPB also signaled potential changes to the other new QM final rule it issued on December 10, 2020, establishing requirements for a new Seasoned QM loan (Seasoned QM Rule), which also took effect March 1, 2021.
Besides noting that it was planning to issue a proposed rule to delay the mandatory compliance date of the Revised General QM Rule, as occurred on March 3, 2021, the CFPB’s statement also said the CFPB is considering revisiting, via a new rulemaking, the Seasoned QM Rule. If it does so, the statement included that the CFPB expects to consider whether any potential final rule revoking or amending the Seasoned QM should affect covered transactions where the application was received during the period between March 1, 2021, and the effective date of the new rule.
Until the CFPB finalizes any new rule(s), the final rules issued on December 10, 2020, remain effective.
Notably, the CFPB also recently updated its small entity compliance guide on the Ability-to-Repay/Qualified Mortgage Rule and other related compliance materials (such as those found here, here, and here) to reflect the Revised General QM Rule, Seasoned QM Rule, and GSE Patch Extension Final Rule issued last year (as well as other miscellaneous updates to the small entity compliance guide).
WBK’s previous coverage of the final Revised General QM and Seasoned QM Rules can be found here. WBK will continue to monitor developments regarding these rules and report on them.