Mortgage

CFPB delays the date of conformity of the QM rule

The Consumer Financial Protection Bureau plans to postpone the compliance date of the qualifying mortgage rule and may revoke or amend a separate rule that created a new category of “seasoned” QM loans.

Acting CFPB Director Dave Uejio said Tuesday that the CFPB will shortly issue a rule proposal to postpone the mandatory compliance deadline for the general QM rule on July 1st. The office said it would also consider at a later point in time whether further rules should be introduced "in order to reconsider other aspects of the QM rule".

The changes come as no surprise as Uejio said earlier this month that the CFPB would rethink any rules implemented under the Trump administration that have not yet come into effect. The underwriting rule was created after the 2008 financial crisis to set parameters such as a debt ratio of 43%, which defines loans as safe and uses these criteria to protect lenders from legal liability.

“Extending the compliance deadline would give lenders more time to issue QM loans based on a debt-to-income ratio, or whether the loans are eligible for sale to Fannie Mae or Freddie Mac, and not just a price cut, "Uejio said in a blog post.

Still, mortgage lenders could experience whiplash as former CFPB director Kathy Kraninger, a Trump-appointed person, just proposed an overhaul in June to replace the 43% DTI rate with a price threshold on loans that are deemed safe, Qualified mortgages are designed to apply.

In August, Kraninger also proposed a rule that QM loans held on a lender's balance sheet for 36 months, or "senior loans" based on a borrower's payment history over the past three years, for what is known as QM Status come into question.

The QM rule has been the subject of intense debate since 2014 when loans supported by Fannie Mae and Freddie Mac were exempted from the 43% DTI requirement of the QM rule. The government-sponsored company exemption – known as the GSE "Patch" – was due to expire in January. The office had previously set an effective date of March 1st for both the QM rule and the experienced QM rule with a mandatory compliance date of July 1st.

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