The CFPB believed that the GSE Patch was a way to preserve access to credit for consumers during a transitioning mortgage market. This exemption would be available for seven years or until either GSE ceased to be in conservatorship. The GSE Patch created an exemption from the 43% DTI rule for loans eligible for purchase or guaranteed by government-sponsored enterprises (GSEs), aka Fannie and Freddie. The GSE Patchīecause loans with DTI ratios above 43% represented a significant percent of mortgages and were not by nature inconsistent with responsible lending, the CFPB proposed a Temporary GSE QM loan provision, which came to be known as the GSE Patch. They argued that it was constraining, increased the possibility of litigation, and would result in the exclusion of borrowers. Many mortgage industry representatives and consumer advocates were against it. At the time, this one-size-fits-all approach received pushback from industry groups and consumer advocates. Monthly payments for property taxes, insurance, and HOAsĪlthough the CFPB had considered alternatives, it ultimately settled on a hard DTI limit of 43% for QM loans, with the exception of government-insured loans through the VA, FHA, and USDA programs. Monthly payment of other loans on the property To be considered a qualified mortgage (QM), a borrower’s ability to repay the loan was based on eight factors: Simply put, it required a lender to verify a borrower’s ability to repay a loan before approving it. In January 2014, the CFPB enacted the ATR/QM rule. As part of the act, the CFPB was created the following year with the purpose of protecting the interests of consumers in relationship to financial products and services. History of ATR/QM RuleĪs many of us recall, the 2007 crisis in the subprime mortgage market and the subsequent 2008 financial crisis led to the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. To fully understand the complications of such a move and the contentious relationship between the 43% DTI rule and the exemptions implemented by the CFPB, it helps to review the origins of both. However, the road from a proposed amendment to actual implementation can be a winding one with a number of potential detours and roadblocks. Is this an accurate reading of the recent steps taken by the Consumer Financial Protection Bureau (CFPB) or just wishful thinking? In a letter to Congress in January of this year, Director Kathy Kraninger stated that the CFPB was proposing an amendment to the Ability to Repay/Qualified Mortgage rule (ATR/QM rule) that would eliminate the debt-to-income (DTI) ratio as a qualifying factor in mortgage underwriting. The end of the 43% DTI rule is approaching - so say many in the mortgage industry. Issued an NPRM to create a new category of seasoned qualified mortgages (Seasoned QMs) that would encourage innovation in the market and help ensure consumer access to responsible and affordable mortgage credit. ![]() Proposed to amend the General QM definition in Regulation Z to replace the DTI limit with a price-based approach and to extend the GSE Patch to expire upon the effective date of that amendment. This resulted in the following changes to their 2020 Agenda:ĭeadline missed to issue a Notice of Proposed Rulemaking (NPRM) related to the ATR/QM rule. Subsequently, the Consumer Financial Protection Bureau (CFPB) prioritized the steps they could take in response to the COVID-19 emergency and related financial crisis. This article was published just days after the World Health Organization (WHO) declared the spread of COVID-19 a pandemic.
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