CFPB Proposes A New Category of Qualified Mortgages

The Consumer Financial Protection Bureau, August 18, 2020, proposed to create a new category of qualified mortgages, the so-called “Seasoned” QM.  The Bureau’s stated goal is to encourage innovation and affordable mortgage credit in the mortgage credit market.

Under the proposal, qualifying as a Seasoned QM would have a variety of requirements including that the:

●      Loans would need to be first-lien, fixed-rate covered transactions meeting certain requirements over a 36-month period

●      Loans would need to be held on creditor’s portfolio for a specified time, and comply with certain restrictions on features, points, and fees

●      Creditor would need to have considered and verified certain criteria, including debt-to-income ratio or residual income

●      Loans would need to have had no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period

The CFPB would allow for exceptions to certain requirements in times of national emergencies, such as COVID-19. 

This makes the CFPB’s third NPRM regarding QM loans in recent months. The first NPRM proposed to replace the DTI limit with a price-based approach, and can be found here.

The second NPRM proposed to extend the temporary QM definition known as the GSE patch and can be found here. 

The Bureau’s issuance for this latest Seasoned QM NPRM can be found here.

For more information, contact Troy Garris at 301-461-8952 or troy@garrishorn.com.