CFPB Seeks to Delay Mandatory Compliance of General QM Rule

Housing Finance
Contact: Curtis Milton
Director, Single Family Finance
(202) 266-8597

The Consumer Financial Protection Bureau (CFPB) today proposed to delay the mandatory compliance date of the General Qualified Mortgage (QM) final rule from July 1, 2021 to Oct. 1, 2022.

In a press release, the agency said it is extending the compliance date to “ensure home owners struggling with the financial impacts of the COVID-19 pandemic have the options they need.”

The General QM final rule would replace 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. 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.

QM loans are presumed to be made based on the lender’s reasonable determination of the home owner’s ability to repay the loan.

The CFPB said that extending the mandatory compliance date of the General QM final rule “would allow lenders more time to offer QM loans based on the home owners’ debt-to-income (DTI) ratio, and not solely based on a pricing cut-off. Extending the compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac.”

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