VA Announces Status of 2014 Interim Final Rule Regarding QMs and IRRRLs

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The VA recently published an update concerning the status of a VA interim final rule that was previously published on May 9, 2014.  The interim final rule defined which VA-guaranteed loans would be considered qualified mortgages (QMs) for purposes of the TILA ability-to-repay requirements. According to the update, the VA will not publish a final rule to adopt the interim final rule, but will in the “near future” publish a separate regulation that will supersede the provisions of the interim final rule.

The interim final rule that is the focus of the VA’s announcement would have amended the VA Loan Guaranty regulations to implement the provisions of the Dodd-Frank Act requiring that the VA define the types of VA loans that are QM for the purpose of the ability-to-repay provisions of TILA.  Specifically, the interim final rule established that almost all VA-guaranteed loans that were to be considered QMs would have safe harbor QM status, but certain Interest Rate Reduction Refinance Loans (known as “IRRRLs”) would be entitled only to rebuttable presumption QM status.  Such IRRRLs would be those that meet the requirements for the VA-guaranty but fail to meet the IRRRL-specific seasoning and recoupment requirements.  The interim final rule also specified income verification requirements for IRRRLs.

According to the VA, the agency is not seeking to finalize the interim final rule because the 2018 Economic Growth, Regulatory Relief and Consumer Protection Act (the “Act”) superseded certain aspects of that rule.  Thus, rather than finalizing the interim final rule, the VA indicated that it will revise its QM criteria in a separate future rulemaking.  However, until such future rulemaking is final, the interim final rule remains in effect, unless it conflicts with or is superseded by the Act.

The full VA notice is available here.

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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