AFSA Assembling Working Group on QM Proposal

The CFPB has released an advance notice of proposed rulemaking to solicit feedback about future changes to qualified mortgage standards under Regulation Z.  In particular, the CFPB intends to allow the current treatment of loans eligible for purchase by Fannie Mae or Freddie Mac (“GSEs”) to expire on schedule. 

Under current rules, a category of mortgage loans called “qualified mortgages” are presumed to meet legal requirements around assessing consumers’ ability to repay.  The rules allow loans that are eligible for purchase by the GSEs to achieve qualified mortgage status even if those loans fail to meet the debt-to-income ratio required for other loans.  That special treatment for GSE-eligible loans is scheduled to expire in January 2021. 

The CFPB is seeking feedback from stakeholders on potential changes to the qualified mortgage rules, including:

·         Whether the qualified mortgage definition should retain a quantitative measure of the borrower’s financial condition;

·         Whether ability-to-repay standards that lack quantitative measures of borrowers’ financial conditions are adequate to establish borrowers’ ability to repay;

·         What additional changes to the qualified mortgage rules should the Bureau consider minimizing disruption when the special treatment of GSE-eligible loans expires; and,

·         How much time the mortgage industry will need to adapt to new qualified mortgage rules when those become final.

The advance notice of proposed rulemaking was published in the July 31st Federal Register, which activates a 45-day comment period.  AFSA is assembling a working group under the Law Committee to collect feedback from member companies on the issues raised and to prepare a comment letter in response to the notice.