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 credit."
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.