“This Seasoned QM Final Rule will ensure access to responsible, affordable credit in the mortgage market through responsible innovation,” said Kraninger. The creditor or first purchaser also generally must hold the loan on portfolio until the end of the seasoning period. ![]() ![]() Specifically, the loan can have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days at the end of the seasoning period, the CFPB stated. ![]() The loan must also “season” by meeting certain performance requirements at the end of the seasoning period. As under the General QM Final Rule, the creditor must also consider the consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, and debts and verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts, the CFPB said. To be eligible to become a Seasoned QM, a loan must be a first-lien, fixed-rate loan with no balloon payments and must meet certain other product restrictions. The 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, according to the CFPB. And the CFPB’s rulemaking exacerbates the vulnerability of borrowers with small, high-priced mortgage loans, largely made to borrowers who are lower-income and people of color.”įor its part, the Bureau said it is also is encouraging innovation in the mortgage origination market through the issuance of the Seasoned QM Final Rule. “The Bureau failed to adequately consider reasonable alternatives to its general QM proposal, including extending the current approach of incorporating lending standards with compensating factors from Fannie Mae and Freddie Mac or a more holistic measurement of ability-to-pay based on a borrower’s household budget or cash flow. Homeowners with unaffordable loans sanctioned by the new rules will not be able to rely on the ability to repay rule to help prevent a foreclosure,” the NCLC said. “Both the CFPB’s new approach to general Qualified Mortgages (QM), establishing ability to repay based on price rather than a borrower’s situation, and its new ‘seasoned QM’ rule, establishing ability to repay based on three years of loan payments, do not measure an individual borrower’s capacity to make payments. “Our final rule’s price-based approach strikes the best balance between assessing consumers’ ability to repay and promoting access to responsible, affordable mortgage credit.”īut the National Consumer Law Center (NCLC) disagrees with the CFPB’s assessment of the new rule. “Through this General QM Final Rule, we are working to create an appropriate, more flexible General QM loan definition,” said CFPB Director Kathleen L. Requires lenders to consider a consumer’s DTI ratio or residual income, income or assets other than the value of the dwelling, and debts and removes appendix Q and provides more flexible options for creditors to verify the consumer’s income or assets other than the value of the dwelling and the consumer’s debts for QM loans.Retains the General QM loan definition’s existing product-feature and underwriting requirements and limits on points and fees.Provides higher pricing thresholds for loans with smaller loan amounts, for certain manufactured housing loans, and for subordinate-lien transactions.In addition, according to the CFPB, the General QM Final Rule: A loan receives a rebuttable presumption that the consumer had the ability to repay if the annual percentage rate exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more but by less than 2.25 percentage points. Under the General QM Final Rule, a loan receives a conclusive presumption that the consumer had the ability to repay if the annual percentage rate does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set. Additionally, conditioning QM status on a specific DTI limit could impair access to responsible, affordable credit, the CFPB stated. In adopting a price-based approach to replace the specific DTI limit for General QM loans, the Bureau said it determined a loan’s price is a strong indicator of a consumer’s ability to repay and is a more holistic and flexible measure of a consumer’s ability to repay than DTI alone. “The Bureau’s issuance of its two new rules will support a smooth and orderly transition away from the Patch and maintain access to responsible, affordable mortgage credit upon its expiration,” the agency said.
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