The “qualified mortgage” (QM) rule will be amended by moving away from the 43% debt-to-income (DTI) ratio requirement to a new threshold, according to a proposal outlined by the director of the federal consumer financial protection agency Thursday.
Consumer Financial Protection Bureau (CFPB) Director Kathleen (“Kathy”) Kraninger told the House Financial Services Committee that the bureau will propose amending the QM rule with an alternative, such as a pricing threshold, to “better ensure that responsible, affordable mortgage credit remains viable for consumers.”
Although the agency is proceeding with the proposal, Kraninger said, the bureau would also “welcome legislation through which Congress could weigh the important policy objectives at issue.”
Kraninger reminded the committee that the so-called “GSE patch” is slated to expire Jan. 10, 2021. The patch does not impose a DTI cap for loans eligible for purchase or guarantee by government-sponsored enterprises Fannie Mae or Freddie Mac. The QM definition itself was the subject of an advance notice of proposed rulemaking (ANPR) last summer on potential changes to it, in advance of the expiration of the patch next year.
In other comments, Kraninger told the committee that the bureau intends to cite or challenge abusive conduct when the harm to consumers exceeds the benefits. Last month, the CFPB announced a “framework” on how to apply the abusiveness standard in supervision and enforcement matters. “For too long, this has been a gray area creating uncertainty and hampering consumer-beneficial innovation,” she said.
Now, Kraninger said, the bureau will “clearly demonstrate the nexus between cited facts and our legal analysis in a way that supports development of the metes and bounds of abusive acts and practices as distinguished from unfair or deceptive acts and practices.”
She also said the bureau will seek “certain types of monetary relief” only when the entity has failed to make a good-faith effort at compliance. “Restitution for consumers will be the priority in such cases,” she said.