The Consumer Financial Protection Bureau has proposed the creation of a new category of qualified mortgages.
In a notice of proposed rulemaking (NPRM) issued Tuesday, the CFPB proposed the creation of a “seasoned QM” category “to encourage innovation and help ensure access to responsible, affordable” mortgages.
In order to be considered a seasoned QM under the proposal, a mortgage would have to be a first-lien, fixed-rate transaction that satisfies certain product restrictions, points-and-fees limits and underwriting requirements, and meets performance and portfolio requirements during a 36-month “seasoning” period. Covered loans would have to be held on the creditor’s portfolio during the seasoning period. The creditor would also have to consider and verify the borrower’s debt-to-income ratio or residual income at origination.
Seasoned QMs would only be available for covered transactions that had no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period, according to the NPRM. However, a loan would not be disqualified for failure to make full payments in the event of a disaster or pandemic-related national emergency, so long as the borrower receives a temporary payment accommodation.
“Today’s proposal continues the bureau’s work to encourage safe and responsible innovation in the mortgage origination market,” said CFPB Director Kathy Kraninger. “Our goal though our very deliberative rulemaking process is to protect, promote and preserve the financial wellbeing of American consumers, while at the same time offering access to responsible, affordable mortgage credit.”
The proposal comes on the heels of two earlier proposals regarding the Qualified Mortgage rule – one to extend the so-called “QM patch” and one to eliminate the rule’s DTI requirements.