Bureau’s QM proposals set for Federal Register publication Friday; comments due early August, September

Two proposed rules aimed at addressing the pending expiration of the so-called “GSE patch” in the federal consumer financial protection agency’s qualified mortgage provisions of its Truth in Lending Act regulation are slated for publication Friday in the Federal Register.

One of the proposals, announced by the Consumer Financial Protection Bureau (CFPB) in June, would eliminate from the factors that define a “general QM” loan – one eligible for safe harbor under the agency’s mortgage rules – the requirement that a consumer’s debt-to-income (DTI) ratio not exceed 43%. Under the proposed rule, the DTI limit would be replaced with a price-based threshold. The other keeps the so-called “GSE patch” until the effective date of the final rule on the general QM definition; it would not expire but not before April 21, 2021. The bureau “does not intend for the Temporary GSE QM loan definition to expire prior to April 1, 2021,” the second notice states.

The CFPB also says it is not not proposing to amend the provision in its current rule that states the temporary provision would expire if the GSEs exit conservatorship.

Under current rules, the temporary GSE (government-sponsored enterprise) QM loan definition applies to loans that will be sold to Fannie Mae or Freddie Mac. The provision is currently set to expire no later than Jan. 10, 2021, or when Fannie and Freddie exit conservatorship of the Federal Housing Finance Agency.

Comments on the proposed revisions to the general QM definition rule will be due 60 days after its publication in the Federal Register, or on or about Sept. 8. Comments on the extended temporary GSE QM definition are due in 30 days, or about Aug. 8.

Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z): General QM Loan Definition