CFPB Seeks Feedback on ‘QM Patch’ Ahead of 2021 Expiration

The Consumer Financial Protection Bureau today issued an advance notice of proposed rulemaking seeking feedback on the upcoming expiration of the temporary “GSE patch,” which grants Qualified Mortgage status to loans eligible to be purchased or guaranteed by Fannie Mae or Freddie Mac. The bureau noted that it is currently planning to allow the GSE patch to expire as scheduled in January 2021, “or after a short extension.”

Accordingly, the bureau is seeking comments on possible changes to the ability-to-repay rule, including whether to revise the definition of a Qualified Mortgage. Specifically, the bureau asked for input on the current debt-to-income ratio, as well as potential alternatives for determining borrowers’ ability to repay. Comments on the ANPR will be due 45 days after publication in the Federal Register.

The American Bankers Association welcomed the ANPR, noting that it is a step in the right direction toward reforming the complex mortgage rules which have cause many banks to exit the mortgage lending business in recent years. The association has consistently raised concerns that markets have become overly dependent on what was intended to be a temporary patch. It continues to advocate for a QM designation for well-underwritten, safe loans that applies to all lenders—whether loans are retained in portfolio or sold on the secondary market. For more information, contact ABA’s Rod Alba.