CFPB publishes new general QM and proven QM rules | Weiner Brodsky Kider PC

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On December 10th, 2020 the CFPB published two separate final rules: the first, which redefines the general requirements for qualifying mortgages (general QM rule); and secondly, the definition of requirements for a new tiered QM loan (seasoned QM rule). Both rules come into force 60 days after their publication in the federal register, which is expected shortly. Another new final rule provides that the so-called “Temporary GSE Patch QM” on the binding date of entry into force of the General QM rule, July 1, 2021, or the date on which the GSEs leave the conservatories if they are before Eliminate July 1st, expires.

Essential features of the general QM rule are the abolition and replacement of the requirement that for a general QM the debt-income ratio of the borrower according to Appendix Q must not exceed 43%. The general QM rule replaces the DTI and Appendix Q requirements with requirements based on the pricing of the loan. Under these conditions, a loan can be considered a “Safe Harbor QM” if (among other things) its APR at the time the loan interest rate is set is less than 1.5 percentage points above the APR (3.5 percentage points or more for ancillary loans). A loan can qualify as a “rebuttable presumption QM” if (among other things) its APR at the time the interest rate is set is 1.5 percentage points but less than 2.25 percentage points above the APR. A loan with an APOR exceeding the APOR by 2.25 percentage points or more cannot meet the definition of a general QM, unless it is a smaller loan amount that is subject to higher ceilings.

General QMs must continue to meet the current restrictions on certain credit characteristics that are common to most other QM types (e.g. certain smaller loans). In addition, when creating a general QM, lenders must still “consider and review” a borrower’s income, assets, debts, and liabilities.

However, with the deletion of Appendix Q and the 43% debt-to-income limit, the CFPB has added extensive official comments describing how lenders can consider and verify this information. Importantly, the new rule allows lenders to use certain underwriting criteria from the Fannie Mae Single Family Selling Guide, the Freddie Mac Single-Family Seller / Servicer Guide, the FHA’s Single Family Housing Policy Handbook, the VA Lenders Handbook, the USDA’s Field. to use the Office Handbook for the Direct Single Family Housing Program and / or the USDA’s manual for the Single Family Guaranteed Loan Program. Lenders do not need to use just one such manual and can “mix and match” various drawing criteria in these manuals.

Although the new General QM Rule comes into force 60 days after its publication in the Federal Register (the publication date), lenders who receive loan applications on or after the publication date but before July 1, 2021 can either apply the General QM Loan Requirements, that were in effect before the publication date (including the temporary GSE patch) or the new requirements of the general QM rule. The new requirements of the general QM rule are mandatory for applications received after July 1, 2021.

According to the new Seasoned QM Rule, a loan must be “seasoned” in order to qualify as a QM and to retrospectively receive Safe Harbor QM status. This requires that the loan be held in the portfolio (either by the original lender or by the first company the loan is sold to) for a period of 36 months from the due date of the first payment; In principle, the loan may only be transferred once during this period. The loan cannot be securitized during the maturity period and during this period there cannot be more than two defaults of 30 or more days and no defaults of 60 or more days.

In particular, the Seasoned QM rule provides that during a disaster or epidemic (such as the COVID-19 epidemic) the seasoning phase is effectively suspended for the duration of a temporary payment adjustment period (as in accordance with the provisions of the CARES law on loan waiver). ). Assuming that there is a qualifying change to the loan or the arrears are healed during this Temporary Adjustment Period, the maturity period will consist of (i) the period from the date the loan was first due payment to the beginning of the Temporary Adjustment Period and (ii) from the end of the temporary settlement period up to a total duration of 36 months.

Finally, experienced QMs must meet the current restrictions on certain credit characteristics (negative amortization, more than 30 years duration, etc.) as well as the point and fee restrictions. In addition, an experienced QM must also be a fixed-rate, senior loan. However, the APR of the loan may exceed the APR on the day the interest is set by 1.5 percentage points or more (although a high-priced mortgage as defined by Regulation Z is not an eligible QM loan).

In addition to the changes to General QM and the new, proven QM set up under these two rules, other types of QMs will still be available to lenders including FHA, VA, RHS, Smaller Creditor, and Smaller Institution QMs.

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