The Consumer Financial Protection Bureau
(CFPB) is proposing a new category of qualified mortgage (QM) which it says is
intended to “encourage innovation and help ensure access to responsible,
affordable in the mortgage credit market.” (we assume they meant “affordable credit in the mortgage market.”) The category, “seasoned qualified
mortgages” involves, as the name suggests, holding riskier loans in the
originator’s own portfolio for three years. It is unclear, from the notice of
proposed rulemaking (NPRM) issued on Wednesday, who will then assume or
securitize the loans.
To be considered a Seasoned QM under the
proposal, loans would have to be first-lien, fixed-rate covered transactions
that have met certain performance requirements over a 36-month seasoning
period. In addition to the in-portfolio requirement, the loan must comply
with general restrictions on product features and points and fees and meet
certain underwriting requirements. These include that the creditor verify the
consumer’s debt-to-income ratio (DTI) or residual income at origination and
during the seasoning period.
To qualify as a Seasoned QM a loan could have
no more than two 30-day delinquencies and no delinquencies of 60 or more days
at the end of the seasoning period. Failure to make full mortgage
payments while under a temporary forbearance during a natural disaster or
pandemic would not disqualify a loan from the category.
“Today’s proposal continues the Bureau’s work
to encourage safe and responsible innovation in the mortgage origination
market,” said Consumer Financial Protection Bureau Director Kathleen L.
Kraninger. “Our goal through our very deliberative rulemaking process is
to protect, promote and preserve the financial well-being of American consumers
while at the same time offering access to responsible, affordable mortgage
The new proposal will be open for comment,
joining two earlier NPRMs from the Bureau that are also in the comment period. One
proposes to amend the General QM definition in Regulation Z to replace the DTI
limit with a price-based approach. The second proposes to amend Regulation
Z to extend a temporary QM definition known as the Government-Sponsored
Enterprise Patch to expire upon the effective date of the final rule proposed
in the first NPRM.