A new category of “seasoned” qualified mortgages (QMs) that would apply to portfolio loans meeting certain performance requirements over a 36-month seasoning period, including having no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days, was unveiled Tuesday by the federal consumer financial protection agency.
Comments are due Sept. 28.
In a release announcing its notice of proposed rulemaking (NPRM), the Consumer Financial Protection Bureau (CFPB) said mortgages considered “seasoned” under the proposal are first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month “seasoning period.”
Transactions covered by the proposal would also have to be: held on a creditor’s portfolio during the seasoning period; comply with general restrictions on product features and points and fees; and meet certain underwriting requirements. The CFPB said that for a loan to be eligible to become a seasoned QM, the proposal also requires that the creditor consider and verify the consumer’s debt-to-income ratio (DTI) or residual income at origination.
Further, the agency said, a seasoned QM 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,” the agency said in its release.
In its release, the agency pointed out the latest proposal is the third it has issued since June on qualified mortgages. The first proposed amending the general QM definition in Regulation Z to replace the DTI limit with a price-based approach. Comments are due Sept. 8. The second proposed amending Regulation Z to extend a temporary QM definition known as the government-sponsored enterprise (GSE) “patch” to expire upon the effective date of the final rule proposed in the first NPRM. Comments closed on that proposal Aug. 10.