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CFPB extends QM compliance to October 2022
On April 27, the CFPB issued a final rule formally extending the mandatory compliance date of the General Qualified Mortgage (QM) final rule to October 1, 2022. As previously covered by InfoBytes, and following a two-year rulemaking, last December the Bureau issued the General QM Final Rule to amend Regulation Z and revise the definition of a “General QM” by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The General QM Final Rule also eliminated QM status resulting solely from loans qualifying for sale to Fannie or Freddie Mac (GSEs), known as the “GSE Patch.” The General QM Final Rule took effect March 1, 2021, but compliance with the new rule is not mandatory until July 1, 2021; in the intervening period, the original and revised General QM Rule are concurrently effective.
On March 3, the Bureau proposed delaying the mandatory compliance date to provide “greater creditor flexibility and expanded availability of responsible, affordable credit options for some struggling consumers” by keeping both the old and new rule until October 1, 2022. (Covered by InfoBytes here.) By extending the mandatory compliance date, lenders will now have the option of complying with either the revised General QM definition or the original DTI-based General QM definition on applications received on or after March 1, but prior to October 1, 2022. “As the mortgage market navigates an uncertain and challenging time, extending the date by which lenders must comply with the CFPB’s new General QM definition will help provide options and flexibility for both lenders and borrowers,” acting CFPB Director Dave Uejio stated in announcing the official extension.
Delaying the General QM Final Rule’s mandatory compliance date will also provide lenders additional time to use the GSE Patch, the Bureau noted. However, as previously covered by InfoBytes, on April 8 the GSEs announced that—due to preferred stock purchase agreements (PSPA) with the U.S. Department of Treasury, which require that acquired loans meet the General QM Rule’s loan definition that became effective March 1—the GSEs will no longer, in accordance with the dates below, acquire GSE Patch loans that fail to meet the requirements of the revised General QM Rule, which functionally eliminates the utility of the GSE Patch. Specifically, to be eligible for purchase, Fannie Mae (see Lender Letter LL-2021-09) requires these loans to have application dates on or before June 30, 2021, and be purchased as whole loans on or before August 31, 2021, or be in MBS pools with an issue date on or before August 1, 2021. Freddie Mac issued similar requirements (see Bulletin 2021-13) for loans with application received dates on or after July 1, 2021, and all mortgages with settlement dates after August 31, 2021. As a result, unless the GSEs negotiate an additional amendment to their respective PSPA, this extension will have limited utility to the market.
Fannie and Freddie update General QM Rule loan eligibility
On April 8, Fannie Mae issued Lender Letter LL-2021-09 announcing updates to eligibility for loans subject to the CFPB’s revised General Qualified Mortgage (QM) Rule (covered by InfoBytes here). Among other things, Fannie notes that because its preferred stock purchase agreement (PSPA) with the U.S. Department of Treasury requires that acquired loans meet the General QM Rule’s loan definition that became effective March 1, it will no longer, in accordance with the dates below, acquire GSE Patch loans that fail to meet to the revised General QM Rule. Specifically, in order to be eligible for purchase by Fannie (certain exceptions are provided for government loans), such loans “must have application dates on or before June 30, 2021” and must “be purchased as whole loans on or before August. 31, 2021, or in MBS pools with an issue date on or before August 1, 2021.” Fannie further notes that it continues to assess the impact of the revised General QM Rule and PSPA on its policies and operations and anticipates further eligibility and underwriting requirement changes. The same day Freddie Mac also issued Bulletin 2021-13, which provides similar updates for loans with application received dates on or after July 1, 2021, and all mortgages with settlement dates after August 31, 2021.
CFPB settles with California-based company for debt collection violations
On April 6, the CFPB announced a consent order against a California-based debt collector and its former owner for allegedly harassing consumers and threatening to take legal action if they did not pay their debts. According to the CFPB, the respondents violated the FDCPA and the CFPA’s prohibition against deceptive acts or practices by mailing letters to consumers printed with “Litigation Notice” that threatened recipients with legal action if they did not repay their debts. However, the Bureau stated that the respondents did not file lawsuits against the consumers, nor did they hire law firms or lawyers to obtain any judgments or collect on any such judgments. Under the terms of the consent order, the respondents are permanently banned from the debt collection industry and are ordered to pay $860,000 in redress to its victims, which has been suspended due to an inability to pay, as well as a $2,200 civil money penalty. This is the CFPB’s latest action taken against debt collectors that have used false threats to collect debts. As previously covered in InfoBytes, in 2019 the CFPB and New York attorney general announced proposed settlements with a network of New York-based debt collectors to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the CFPA, the FDCPA, and various New York laws. Also, in 2018, the CFPB announced a settlement with a Kansas-based company and its former CEO and part-owner that allegedly engaged in improper debt collection tactics in violation of the CFPB’s prohibitions on engaging in unfair, deceptive, or abusive acts or practices (covered by InfoBytes here).
CFPB proposes extending General QM Final Rule compliance date
On March 3, the CFPB released a notice of proposed rulemaking (NPRM) to delay the mandatory compliance date of the General Qualified Mortgage (QM) Final Rule from July 1, 2021 to October 1, 2022. As previously covered by InfoBytes, last December the Bureau issued the General QM Final Rule to amend Regulation Z and revise the definition of a “General QM” by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The new General QM definition became effective on March 1, 2021. The General QM Final Rule also eliminates QM status resulting solely from loans meeting qualifications for sale to Fannie or Freddie Mac (GSEs), known as the “GSE Patch.” In issuing the NPRM, the Bureau expressed concerns “that the potential impact of the COVID-19 pandemic on the mortgage market may continue for longer than anticipated at the time the Bureau issued the General QM Final Rule, and so could warrant additional flexibility in the QM market to ensure creditors are able to accommodate struggling consumers.” Extending the compliance date will allow lenders to offer QM loans based on either the old or new QM definitions, including the GSE Patch (unless the GSEs exit conservatorship), until October 1, 2022. Comments on the NPRM must be received by April 5.
The NPRM follows a statement issued last month (covered by InfoBytes here), in which the Bureau said it is considering whether to revisit final rules issued last year that took effect March 1 concerning the definition of a Qualified Mortgage and the establishment of a “Seasoned QM” category of loans. In the NPRM, the Bureau stated “this rulemaking does not reconsider the merits of the price-based approach adopted in the General QM Final Rule. . . . Rather, this proposal addresses the narrower question of whether it would be appropriate in light of the continuing disruptive effects of the pandemic to help facilitate greater creditor flexibility and expanded availability of responsible, affordable credit options for some struggling consumers” by keeping both the old and new rule until October 1, 2022.
CFPB considering compliance delay for QM final rules
On February 23, the CFPB issued a statement noting it is considering whether to revisit final rules issued last year regarding the definition of a Qualified Mortgage and the establishment of a “Seasoned QM” category of loans. As previously covered by InfoBytes, last December the Bureau issued the General QM Final Rule to amend Regulation Z and revise the definition of a “General QM” by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The General QM Final Rule also eliminates QM status resulting solely from loans meeting qualifications for sale to Fannie or Freddie Mac (GSEs), known as the “GSE Patch.” The Bureau issued a second final rule, the Seasoned QM Final Rule, to create a new category of safe-harbor QMs applicable to first-lien, fixed-rate mortgages that are held in portfolio by the originating creditor or first purchaser for a 36-month period while meeting certain performance requirements, and comply with general QM restrictions on product features and points and fees. The effective date for both final rules is March 1. The General QM Final Rule also has a mandatory compliance date of July 1.
In the statement, the Bureau noted that it is “considering whether to initiate a rulemaking to revisit the Seasoned QM Final Rule,” including whether to revoke or amend the Seasoned QM Final Rule and how that would affect covered transactions for which applications were received after the March 1 effective date. In addition, the Bureau stated that it expects to issue a rule to delay the July 1, 2021 mandatory compliance date of the General QM final rule. Should a proposed rule be finalized, creditors would then “be able to use either the current General QM loan definition or the revised General QM loan definition for applications received during the period from March 1, 2021, until the delayed mandatory compliance date,” the Bureau said. Additionally, the GSE patch would also remain in effect until the new mandatory compliance date, or until the GSEs cease to operate under conservatorship prior to that date.
The same day, the Bureau updated its small entity compliance guide and other compliance aids for the Ability-to-Repay and Qualified Mortgage Rule. The updates reflect amendments set forth in the GSE Patch Extension Final Rule, the General QM Final Rule, and the Seasoned QM Final Rule.
Acting director outlines future direction for CFPB
On February 4, CFPB acting Director Dave Uejio published a blog post conveying his “broad vision” for the Division of Research, Markets, and Regulations (RMR). Uejio emphasized that in order for the Bureau to respond to his previously stated policy priorities—(i) relief for consumers facing hardship and economic crisis due to the Covid-19 pandemic, and (ii) racial equity (covered by InfoBytes here)—the agency must sharpen its focus on the consumer experience. To achieve this goal, Uejio is authorizing the Bureau’s use of its 1022(c)(4) data collection authority and has asked RMR to examine “the impact of specific industry practices on consumers’ daily budget and overall bottom line in order to target effective policy interventions.” Among other things, RMR has been asked to take the following immediate steps:
- Prepare an analysis assessing housing insecurities such as mortgage foreclosures, mobile home repossessions, and landlord-tenant evictions.
- Prepare an analysis to address pressing consumer financial barriers to racial equity in order to “inform research and rulemaking priorities,” and “[e]xplicity include in policy proposals the racial equity impact of the policy intervention.”
- Resume data collections paused due to Covid-19, including HMDA quarterly reporting, CARD Act data collection, PACE data collection, and the previously completed 1071 data collection.
- Focus mortgage servicing rulemaking on Covid-19 responses “to avert, to the extent possible, a foreclosure crisis” when pandemic forbearances end in March and April.
- Explore options for preserving the status quo with respect to QM and debt collection rules. (QM rules covered by InfoBytes here and a Buckley Special Alert; debt collection rules covered by InfoBytes here and here.)
Uejio also noted that he “will be assessing regulatory actions taken by the previous leadership and adjusting as necessary and appropriate those not in line with [the Bureau's] consumer protection mission and mandate,” and that he wants to “preserve, where possible, maximum policy flexibility” for President Biden’s nominee once confirmed.
CFPB lets QM cure provision expire
January 10 was the sunset date for the QM Rule’s provision allowing creditors to cure loans that exceed the rule’s limitation on points and fees. For transactions consummated prior to January 10, a creditor could cure any loan exceeding the (generally 3 percent) points and fees limit by refunding to the consumer the excess amount plus interest within 210 days of consummation (assuming the borrower had not notified the creditor of the error or become 60 days past due). The cure provision was originally added by the amendments to the ATR/QM Rule published in November 2014 and was always set to expire on January 10, 2021. The new QM rulemakings issued by the CFPB in December 2020 (covered by a Buckley Special Alert) do not extend it or replace the cure provision.
Special Alert: CFPB redefines Qualified Mortgage; “GSE Patch” to expire
The Consumer Financial Protection Bureau last week released two final rules further defining what types of loans can be a “qualified mortgage loan” for purposes of the bureau’s Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule). The General QM Final Rule substantially revamps the general rules defining what constitutes a General QM and removes the existing debt-to-income threshold over which a loan cannot be considered a General QM. The Seasoned QM Final Rule creates a new class of QM that allows certain rebuttable presumption QMs and non-QMs to achieve “safe harbor” QM status three years after origination provided the consumer has strong repayment history.
Importantly, the “GSE Patch,” which provides QM status to loans qualifying for sale to Fannie Mae or Freddie Mac, expires for applications submitted before July 1, 2021, at which point the General QM Rule will take effect (although compliance with both rules is permitted 60 days after publication in the Federal Register).
CFPB amends General QM loan definition, creates definition for Seasoned QMs
On December 10, the CFPB issued two final rules related to qualified mortgage (QM) loans. The first of the two final rules, the General QM Final Rule, amends Regulation Z and revises the definition of a General QM by eliminating the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replacing it with bright-line price-based thresholds. The General QM Final Rule also eliminates QM status resulting solely from loans meeting qualifications for sale to Fannie or Freddie Mac (GSEs), known as the so-called “GSE Patch.” The Bureau’s second final rule, the Seasoned QM Final Rule, creates a new category of safe-harbor QMs applicable to first-lien, fixed-rate mortgages that are held in portfolio by the originating creditor or first purchaser for a 36-month period while meeting certain performance requirements, and comply with general restrictions on product features and points and fees.
Both final rules become effective 60 days after publication in the Federal Register. The mandatory compliance date for the General QM Final Rule is July 1, 2021; however, the Bureau notes that, between the effective date and the mandatory compliance date, there will be an optional early compliance period during which creditors will be able to use either the current General QM definition or the revised General QM definition. In addition, the GSE Patch will be available only for transactions where the creditor receives the consumer’s application before July 1, 2021 (or earlier if the GSEs exit conservatorship). Further, the Seasoned QM Final Rule applies to covered transactions for which creditors receive an application on or after the effective date, but will not apply retroactively to loans already in a lender’s portfolio.
Buckley will follow up with a more detailed summary of the final rules soon.
CFPB extends GSE Patch
On October 20, the CFPB issued a final rule extending the expiration of the GSE Patch until the mandatory compliance date of final amendments to the General Qualified Mortgage (QM) loan definition in order to facilitate a smooth and orderly transition away from the GSE Patch. As previously covered by a Buckley Special Alert, in June, the Bureau released two Notices of Proposed Rulemaking (NPRM) to address the January 2021 expiration of the GSE Patch for the QM Rule. The first NPRM proposed to remove the General QM loan definition’s 43 percent debt-to-income ratio (DTI) limit and replace it with a price-based threshold and the second proposed to extend the expiration of the GSE Patch.
The final rule replaces the original expiration of the GSE Patch (January 1, 2021) until the mandatory compliance date of the final amendments to the QM loan definition. The final rule also provides that the current QM definition “will be available only for covered transactions for which the creditor receives the consumer’s application before the mandatory compliance date of final amendments to the General QM loan definition in Regulation Z.” Notably, the NPRM for the new QM loan definition proposes an effective date of six months after the final rule is published in the Federal Register and the rule has not yet been published; it does not discuss a mandatory compliance date.