ABA, Advocacy Groups Call for Changes to QM Framework Ahead of ‘GSE Patch’ Expiration

ABA joined a broad coalition of financial industry stakeholders, civil rights groups and other advocacy organizations in a letter to the Consumer Financial Protection Bureau today offering feedback on the 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 letter was sent in response to an advanced notice of proposed rulemaking by the CFPB, and comes ahead of a Senate hearing tomorrow on housing finance reform.

With the bureau poised to allow the GSE patch to expire as scheduled in January 2021, “or after a short extension,” the groups proposed several changes to the QM framework. Importantly, the groups called on the CFPB to eliminate from the general QM category the debt-to-income ratio and the associated Appendix Q. They noted that doing so is “the best way to enable fair market competition across all lending channels while also ensuring that these creditworthy individuals can be served in a safe and sound manner under the existing ATR-QM framework.”

The groups also called on the bureau to maintain and enhance the existing Ability-to-Repay Rule’s regulatory language and maintain the existing QM statutory safe product restrictions that prohibit certain risky loan features—such as loan terms over 30 years, negative amortization or interest-only payments—and clarify provisions related to documentation and verification of income.