Delay of Price-Based General QM Mandatory Compliance Date
As noted in an earlier blog, the Consumer Financial Protection Bureau (Bureau) had proposed to delay the mandatory compliance date of the price-based general qualified mortgage (QM) rule, which was finalized last December. Before the rule was finalized, the definition of a general QM under Regulation Z involved a standard based on a 43% debt-to-income (DTI) limit. The final rule substituted a price-based standard that compares the annual percentage rate versus the average prime offer rate. As long as the annual percentage rate does not exceed the average prime offer rate by more than the thresholds permitted by the rule, which are described in this NAFCU compliance blog from December, a loan can satisfy the price-based general QM definition.
Under the December 2020 final rule, the effective date of the price-based general QM definition was March 1, 2021, and the rule set July 1, 2021 as the mandatory compliance date. For applications received on or after March 1, 2021 but before July 1, 2021, the final rule permitted credit unions to choose whether to comply with the DTI-based general QM definition or with the price-based general QM definition. The effect of the rule also permitted credit unions to rely on the definition of temporary QMs sold to government sponsored entities (GSE patch) until July 1, 2021.
Late last month, the Bureau finalized the rule delaying the mandatory compliance date of the price-based general QM definition. The rule pushes the mandatory compliance date of the price-based general QM definition to October 1, 2022.
Why Are They Delaying the Mandatory Compliance Date?
The Bureau feels that the current mandatory compliance date may harm some homeowners in “that mandating the transition to the price-based approach in the revised General QM loan definition on July 1, 2021 could restrict options for consumers struggling with the disruptive effects of the pandemic.” The Bureau noted that many creditors implemented additional underwriting standards at the beginning of the pandemic. The Bureau voiced its concern that access to credit could become an issue because of the effects of the pandemic on the secondary market, especially when considering the potential effects arising out of the extension of forbearance programs and foreclosure and eviction moratoria. The Bureau’s approach theoretically provides credit unions with flexibility in originating loans under the old DTI-based general QM loan definition, the price-based general QM loan definition, or the GSE Patch through the October 1, 2022 mandatory compliance date suggesting that credit unions will have more options to originate QMs to borrowers who might qualify under one definition but not another.
Whether this will actually happen remains to be seen. Both the Bureau and commenters noted that January 2021 amendments to the terms of the Preferred Stock Purchase Agreements (PSPAs) for Fannie Mae and Freddie Mac may limit their ability to acquire loans on or after July 1, 2021 originated in compliance with the GSE Patch because section 5.14(c)(i) of the PSPA only permits acquisition of loans that are QMs “as defined in 12 CFR § 1026.43(e)(2), (5), (6), (7), or (f) . . . .” The GSE Patch is not one of those defined QMs.