The Consumer Financial Protection Bureau (CFPB) has issued a notice of proposed rulemaking (NPRM) to create a new category of seasoned qualified mortgages (QMs).
Under the proposal, to be considered a seasoned QM, loans would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. Covered transactions would also have to be held on the creditor’s portfolio during the seasoning period, comply with general restrictions on product features and points and fees, and meet certain underwriting requirements.
For a loan to be eligible to become a seasoned QM, the proposal would also require that the creditor consider and verify the consumer’s debt-to-income ratio (DTI) or residual income at origination.
Seasoned QMs would only be available for covered transactions that have no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period. Also, should there be a disaster or pandemic-related national emergency – and as long as certain conditions are met – the proposal would not disqualify a loan from becoming a seasoned QM for the failure to make full contractual payments if the consumer receives a temporary payment accommodation.
“Our goal through our very deliberative rulemaking process is to protect, promote and preserve the financial well-being of American consumers while at the same time offering access to responsible, affordable mortgage credit,” says CFPB Director Kathleen L. Kraninger.
This announcement follows two NPRMs from June of this year regarding QMs. The first NPRM proposes to amend the general QM definition in Regulation Z to replace the DTI limit with a price-based approach. The second NPRM proposes to amend Regulation Z to extend a temporary QM definition known as the GSE patch to expire upon the effective date of the final rule proposed in the first NPRM.
The new NPRM can be found here.
Photo: Kathleen L. Kraninger