The Consumer Financial Protection Bureau finalized rules addressing the pending expiration of the "GSE Patch," which exempts Fannie Mae and Freddie Mac mortgage loans from parts of the bureau's Qualified Mortgage rule.
The patch provides QM status to loans purchased or guaranteed by the government-sponsored enterprises even if they exceed the rule's 43 percent debt-to-income limit. It is scheduled to expire July 1, 2021, or when the government-sponsored enterprises exit conservatorship.
The CFPB's first rule replaces the 43 percent DTI limit with an approach based on loan pricing. The second creates a new category of "seasoned" QMs, allowing non-QM mortgages to “season” into QMs based on strong performance over 36 months.
ICBA has repeatedly expressed concerns with the use of loan pricing to determine the borrower's ability to repay a loan, which favors the largest mortgage lenders and introduces unnecessary risk in the mortgage market. Instead, ICBA has advocated a hybrid approach that retains a range of DTI thresholds above the 43 percent, capped at 50 percent.
ICBA has also encouraged the CFPB to expand on its "seasoned" QM plan by applying it rule retroactively for eligible loans made before the effective date of the final rule, shortening the seasoning period from 36 to 24 months, and raising the small creditor threshold.
