October 21, 2020

CFPB finalizes rule extending the GSE patch

cfpbThe CFPB Tuesday issued a final rule extending the government-sponsored enterprise (GSE) patch until the mandatory compliance date of a final rule amending the general qualified mortgage (QM) loan definition in Regulation Z. The GSE patch was originally set to expire Jan. 10, 2021.

Of note, the bureau highlighted that it does not intend to amend the provision in Regulation Z stating that the patch will expire if the GSEs exit conservatorship.

NAFCU has called for the bureau to allow for an 18- to 24-month extension of the GSE patch, at a minimum. Earlier this year, the association joined with nine other organizations to urge CFPB Director Kathy Kraninger to delay rulemakings on the general QM definition and extend of the patch in the wake of the coronavirus pandemic.

NAFCU has also called on Congress to establish an emergency QM standard with flexible requirements and extend the patch if the CFPB did not provide one.

During NAFCU’s Virtual Congressional Caucus in September, Kraninger indicated that she expects the final rule to be issued in the next few months.

NAFCU previously met with representatives at the CFPB to discuss the patch and highlighted the benefits of the GSE patch in providing credit unions with the ability to sell their loans into the secondary market – generating "vital" liquidity enabling credit unions to make more loans to their members, especially those of low- or moderate-income.

Additionally, the association offered its support for the bureau's proposed rule creating a new category of seasoned QM as it would enhance access to credit for low- to moderate-income borrowers and underserved markets with the requisite ability-to-repay in addition to reducing the negative impacts posed by the bureau's proposed general QM definition.

NAFCU will continue its effort to ensure that credit unions are given enough time to prepare for the elimination of the GSE patch and urge the bureau to consider a longer extension.