CFPB Proposes Category of Seasoned QMs
Written By: Joel Palmer, Op-Ed Writer
The Consumer Financial Protection Bureau (CFPB) has proposed a new category of seasoned qualified mortgages (QMs).
The bureau issued a notice of proposed rule making (NPRM) last week to request comments.
Under the proposal, a loan could be considered a seasoned QM if it’s:
Secured by a first lien
A fixed rate mortgage, with fully amortizing payments and no balloon payment
A loan that does not exceed 30 years
A loan in which total points and fees do not exceed specified limits
Covered transactions would have to meet certain performance requirements over a 36-month seasoning period. They would also have to be held on the creditor’s portfolio during the seasoning period 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.
“Today’s proposal continues the Bureau’s work to encourage safe and responsible innovation in the mortgage origination market,” said CFPB Director Kathleen L. Kraninger. “Our goal through our very deliberative rule making 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.”
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 Government-Sponsored Enterprise Patch to expire upon the effective date of the final rule proposed in the first NPRM.
In the rule making notice, CFPB said the seasoned QM definition could “complement existing QM definitions and help ensure access to responsible, affordable mortgage credit upon the expiration of temporary QM definition.”
Comments can be submitted on the Federal eRulemaking Portal at www.regulations.gov. You can also submit via email at 2020-NPRM-SeasonedQM@cfpb.gov. Include Docket No. CFPB-2020-0028 or RIN 3170-AA98 in the subject line of the message.
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.
