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  • Agencies will not amend qualified residential mortgage definition

    Agency Rule-Making & Guidance

    Recently, the OCC, Federal Reserve Board, FDIC, FHFA, SEC, and HUD issued an interagency notice stating that no changes will be made to the definition of “qualified residential mortgage” (QRM) under the Credit Risk Retention Regulations. The agencies also left unchanged a community-focused residential mortgage exemption from TILA’s ability-to-pay requirement, after determining that the exemption serves the public interest by making “safe, sustainable loans” available to low-to-moderate-income communities. An exemption for qualifying three-to-four-unit residential mortgage loans was also left unchanged after the agencies determined that the underlying properties “are a source of affordable housing” and, given the number of mortgages collateralized by three-to-four-unit properties, the exemption “does not appear to be spurring any significant speculative activity in the securitization market.”

    As part of the Credit Risk Retention Regulations, which were established under Dodd-Frank, federal banking agencies are required to periodically review the QRM definition “to assess developments in the residential mortgage market, including the results of the statutorily required five-year review by the [CFPB] of the ability-to-repay rules and the QM definition.” During their review of the QRM definition, the agencies confirmed that the current QRM definition was “predictive of a lower risk of default” and “did not appear to be a material factor in credit conditions during the review period.”

    Agency Rule-Making & Guidance Federal Issues Federal Reserve OCC FDIC SEC FHFA HUD Bank Regulatory Credit Risk Credit Risk Retention Regulation Dodd-Frank Ability To Repay Qualified Mortgage Qualified Residential Mortgage

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  • CFPB releases TILA and CARD Act specifications

    Federal Issues

    On August 20, the CFPB released new technical specifications regarding credit card agreement and data submission compliance requirements under TILA and the CARD Act (Regulation Z).  Credit card issuers will utilize the Bureau’s website to submit: (i) Terms of Credit Card Plans (TCCP) Survey data (for the deadline of February 14, 2022); (ii) quarterly credit card agreement submissions (for the deadline of January 31, 2022); and (iii) annual reports connected to college credit card marketing agreements and data (for the deadline of March 31, 2022). According to the announcement, for the most recent TCCP Survey cycle that started on January 31, 83 percent of TCCP Survey submissions were made via the Bureau’s “Collect” website on a voluntary basis, which simplified the Survey submission process in a number of ways, including by minimizing confusing, irrelevant, or duplicative questions and providing an “audit trail” to track submissions. In addition, the Bureau understands Collect to be faster both for issuers and for Bureau processing, which “has led to the faster posting of the TCCP Survey results” and enhances the “public’s ability to use the data in a timely manner.” The Bureau believes that these benefits “would be increased if all TCCP Survey respondents used Collect, and that any additional burden on Survey respondents as a result of using Collect would be minimal.” As previously covered by InfoBytes, the CFPB released the final rule revising the dollar amounts for provisions implementing the TILA and amendments to TILA, including CARD Act, the Home Ownership and Equity Protection Act of 1994, and Dodd-Frank’s ability-to-repay and qualified mortgage provisions. The recently released rule took effect upon publication in the Federal Register.

    Federal Issues CFPB Regulation Z TILA CARD Act Dodd-Frank Ability To Repay Qualified Mortgage

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  • CFPB extends QM compliance to October 2022

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB Qualified Mortgage Mortgages Ability To Repay Fannie Mae Freddie Mac GSE

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  • CFPB to address harm created from revocation of payday rule’s ability to repay standard

    Federal Issues

    On March 23, CFPB acting Director Dave Uejio published a blog post highlighting the Bureau’s belief that harms in the small dollar lending market identified by its 2017 final rule covering “Payday, Vehicle Title, and Certain High-Cost Installment Loans” still exist. As previously covered by InfoBytes, in 2020, the Bureau issued a final rule revoking certain underwriting provisions of the 2017 final rule, including (i) the provision that makes it an unfair and abusive practice for a lender to make covered high-interest rate, short-term loans or covered longer-term balloon payment loans without reasonably determining that the consumer has the ability to repay the loans according to their terms; (ii) the prescribed mandatory underwriting requirements for making the ability-to-repay determination; (iii) the “principal step-down exemption” provision for certain covered short-term loans; and (iv) related definitions, reporting, and recordkeeping requirements. Uejio stressed that the Bureau intends to “use the authority provided by Congress to address these harms, including through vigorous market monitoring, supervision, enforcement, and, if appropriate, rulemaking.” Additionally, he noted that the Bureau “continues to believe that ability to repay is an important underwriting standard. To the extent small dollar lenders’ business models continue to rely on consumers’ inability to repay, those practices cause harm that must be addressed by the CFPB.”

    Federal Issues CFPB Small Dollar Lending Payday Lending Ability To Repay Payday Rule Underwriting

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  • CFPB proposes extending General QM Final Rule compliance date

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB Qualified Mortgage Ability To Repay Mortgages Covid-19

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  • CFPB considering compliance delay for QM final rules

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB Ability To Repay Qualified Mortgage GSE Mortgages

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  • CFPB lets QM cure provision expire

    Federal Issues

    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.

    Federal Issues CFPB Ability To Repay Qualified Mortgage

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  • Special Alert: CFPB redefines Qualified Mortgage; “GSE Patch” to expire

    Federal Issues

    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).

    Federal Issues Special Alerts CFPB Qualified Mortgage Ability To Repay Seasoned QM GSE Patch Fannie Mae Freddie Mac Mortgages Agency Rule-Making & Guidance

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  • CFPB amends General QM loan definition, creates definition for Seasoned QMs

    Agency Rule-Making & Guidance

    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.

    Agency Rule-Making & Guidance CFPB GSE Patch GSE Qualified Mortgage Mortgages Ability To Repay Regulation Z

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  • Special Alert: CFPB proposes new Qualified Mortgage definition for Seasoned QMs

    Agency Rule-Making & Guidance

    On August 18, the CFPB released a Notice of Proposed Rulemaking (NPRM) to create a new category of Qualified Mortgages to be called “Seasoned QMs”.  The CFPB concluded that if a loan has performed for a long enough period of time and meets certain underwriting conditions and product restrictions, it is warranted to conclusively presume that the creditor’s determination of a consumer’s ability to repay at consummation was reasonable.  The new QM category would designate the loan as a safe harbor QM, even if the loan did not meet the criteria of any of the other QM definitions at consummation.

    Under the NPRM, a loan originated as a rebuttable presumption QM or as a Non-QM loan will be granted a safe harbor presumption that it complies with the ATR requirements if it (1) meets certain product restrictions and (2) is held in portfolio during the seasoning period and meets specified performance criteria.  The product restrictions require that (1) the loan is secured by a first lien; (2) the loan has a fixed rate, with fully amortizing payments and no balloon payment; (3) the loan term does not exceed 30 years; and (4) the total points and fees do not exceed specified limits.

    Agency Rule-Making & Guidance CFPB Mortgages Ability To Repay Qualified Mortgage Special Alerts

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