The CFPB surprised the industry today, July 25, 2019, by issuing an Advance Notice of Proposed Rulemaking (ANPR) that states the CFPB “currently plans to allow the Temporary GSE QM loan category to expire in January 2021 or after a short extension, if necessary.” The CFPB plans to transition the industry away from the “GSE Patch” to the standard QM category under its Ability to Repay/Qualified Mortgage (ATR/QM) rule.
The CFPB noted in its ANPR that when it issued the original ATR/QM rule it included the temporary GSE Patch with the understanding that “the market would shift toward General QM loans and non-QM loans above a 43 percent DTI ratio,” and that “the continued prevalence of Temporary GSE QM loan originations is contrary to the Bureau’s expectation at the time of the ATR/QM Rule.”
The CFPB states definitively in the ANPR that, “the Bureau does not intend to make the Temporary GSE QM loan provision permanent,” because it believes it would be inconsistent with the purposes of the ability to pay provisions under the Truth in Lending Act, which is the basis for the ATR/QM rule,.
The ANPR seeks comment on certain questions, such as:
(1) Whether to revise the standard QM definition?
(2) Whether the Bureau should continue to use a DTI limit in such a definition, and if so, whether it should change the current 43% limit?
(3) Should Appendix Q be required or replaced, changed, or supplemented?
(4) Or should an alternative standard to assess ability to repay that does not directly measure a consumer’s personal finances be used? What about other credit risk factors, such as LTV or credit score?
(5) Should the CFPB consider other changes to the ATR/QM rule to minimize disruption when the GSE Patch expires?
(5) How much time would industry need to change its practices to respond to the GSE Patch expiration and any new Standard QM definition?
You can access the ANPR here: https://www.consumerfinance.gov/about-us/newsroom/bureau-releases-qualified-mortgage-anpr/.
The comment period is 45 days after publication in the Federal Register. Please contact us if you have any questions, or if you would like assistance with drafting a comment letter.