Consumer Financial Protection Bureau Issues Two Final Rules Changing General QM Standard and Creating Seasoned QM Standard

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The Consumer Financial Protection Bureau (CFPB) released two final rules amending the General Qualified Mortgage loan definition in Regulation Z and creating a new “Seasoned QM” loan category in Regulation Z. The General QM Final Rule replaces the current requirement for the General QM loans that the consumer’s debt-to-income ratio (DTI) not exceed 43 percent with a limit based on the loan’s pricing. The Seasoned QM Final Rule creates a new category of Seasoned QMs for first-lien, fixed-rate covered transactions that have met certain performance requirements, are held in portfolio by the originating creditor or first purchaser for a 36-month period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.

The General QM Final Rule and the Seasoned QM Final Rule will take effect 60 days after publication in the Federal Register. The General QM Final Rule will have a mandatory compliance date of July 1, 2021. The Seasoned QM Final Rule will apply to covered transactions for which creditors receive an application on or after the effective date.

Notably, the GSE “Patch,” which provides QM status to loans qualifying for sale to Fannie Mae or Freddie Mac, will expire on the mandatory compliance date of the General QM Final Rule (July 1, 2021), or the date the GSEs exit conservatorship, whichever comes first.

Read the CFPB’s press release here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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