The CFPB has released a proposed rule that would create a new Qualified Mortgage (QM) category for first-lien, fixed-rate loans meeting certain “performance requirements” over a 36-month timeframe while held “in-house”. These “seasoned QMs” would need to have fully amortizing payments; applicants’ debts and income considered and verified; and meet current restrictions on the loan term (cannot exceed 30 years) and points and fees. Seasoned QMs would also need to meet the following restrictions during a 36-month “seasoning period” that begins with the first payment due date:
- No more than two delinquencies of 30 days or more
- No delinquencies of 60 days or more
There would be a $50 “payment tolerance” that could be used up to three times during the seasoning period. In other words, creditors could decide not to treat a payment as late if it’s within $50 of the amount due. The proposal also allows any seasoning period to resume after a payment accommodation made in connection with a disaster or pandemic-related national emergency, if certain conditions are met.
There have been a few different proposals in the ATR/QM arena lately. If you remember, proposals were also released to revise the standard QM definition and to extend the temporary QM category for loans eligible for purchase or guarantee by Fannie or Freddie. That temporary category of QMs will otherwise expire no later than January 10, 2021. These proposals are all related to each other, as the CFPB does not want to see the temporary category of QMs for Fannie/Freddie loans expire without other QM options in place for those loans. Again, these are just proposals but it’s probably safe to say there will be changes affecting the Ability to Repay and QM requirements and restrictions.
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