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Jeffrey P. Naimon quoted in Inside Mortgage Finance article, “Lenders turn to Appendix Q as QM ‘patch’ nears end”

Inside Mortgage Finance

Jeffrey P. Naimon

Jeffrey P. Naimon was quoted on August 22, 2019 in an Inside Mortgage Finance article, “Lenders turn to Appendix Q as QM ‘patch’ nears end,” which discussed how the pending expiration of the qualified mortgage “patch” has prompted the mortgage industry to seek an overhaul of standards critical for deciding a borrower’s creditworthiness. The article stated, “The standards, known as Appendix Q, address how lenders should document and verify a borrower’s income and liability, which are mainly used to determine whether a mortgage satisfies the 43% debt-to-income ratio limit for QM loans. But once the patch ends in 2021, lenders will have to deal with Appendix Q in order for agency loans to achieve QM status.”  Naimon said, “[Appendix Q] is very technical and difficult,” noting a mortgage could be unsellable if lenders do not meet the technical requirements. But a bigger problem associated with the rule is a lack of flexibility.

The article further reported that the CFPB issued an Advance Notice of Proposed Rulemaking in July, seeking information on how to change or eliminate existing Appendix Q standards, acknowledging the current methods for documenting debt and income can be rigid and difficult to apply. “The CFPB is facing a policy challenge,” said Naimon, “because lenders want clarity, especially given the liability associated with the rule, but the problem with providing specificity and clarity is that if the bureau tries to simply revise and update Appendix Q, it will be a new static rule and could become outdated almost as soon as it is adopted.”

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