CFPB Issues Final Qualified Mortgage Rules
The Consumer Financial Protection Bureau (CFPB) today issued two final rules related to qualified mortgage (QM) loans. The General QM Final Rule replaces the current requirement for General QM loans that the consumer's debt-to-income ratio (DTI) not exceed 43%, with a limit based on the loan's pricing. The second rule creates a new category for QMs, Seasoned QMs.
In adopting a price-based approach to replace the specific DTI limit for General QM loans, the CFPB determined that 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. A loan meets the general QM definition if its annual percentage rate exceeds the average prime offer rate (APOR) for a comparable transaction by less than 2.25 percentage points.
In addition, the General QM Final Rule:
- Provides higher pricing thresholds for loans with smaller loan amounts, for certain manufactured housing loans, and for subordinate-lien transactions.
- Retains the General QM loan definition’s existing product-feature and underwriting requirements and limits on points and fees.
- 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.