The Consumer Financial Protection Bureau issued a notice of proposed rulemaking to create a new category of seasoned qualified mortgages to encourage innovation and help ensure access to mortgage credit.
To be considered a Seasoned QM under the proposal, 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.
“Today’s proposal continues the bureau’s work to encourage safe and responsible innovation in the mortgage origination market,” said Consumer Financial Protection Bureau Director Kathleen L. Kraninger. “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.”
This announcement follows two proposed rulemakings from June
of this year regarding qualified mortgages. The first proposes to amend the General QM definition replace the DTI limit with a price-based approach. Through a recent speech and otherwise, Kraninger has emphasized the importance of receiving public comment from stakeholders in response to this change, especially on possible standards to help the bureau identify verification safe harbors for inclusion in final rules.
The second rulemaking proposes 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 rule making.
The proposed rulemaking changes can be found here