The Consumer Financial Protection Bureau wants to create a new category of “seasoned” qualified mortgages in order to “encourage innovation and help ensure access” to the mortgage credit market.
To be considered a Seasoned QM, loans would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. Covered transactions would also have to be held on the creditor’s portfolio during the seasoning period, comply with general restrictions on product features and points and fees and meet certain underwriting requirements. For a loan to be eligible to become a Seasoned QM, the proposal would also require that the creditor consider and verify the consumer’s debt-to-income ratio or residual income at origination.
Seasoned QMs would only be available for covered transactions that have no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period.
Also, should there be a disaster or pandemic-related national emergency and as long as certain conditions are met, the proposal would not disqualify a loan from becoming a Seasoned QM for the failure to make full contractual payments if the consumer receives a temporary payment accommodation.
“Today’s proposal continues the bureau’s work to encourage safe and responsible innovation in the mortgage origination market,” said CFPB Director Kathleen L. Kraninger. “Our goal through our very deliberative rulemaking process is to protect, promote and preserve the financial well-being of American consumers while at the same time offering access to responsible, affordable mortgage credit.”
The CFPB recently proposed retiring the debt-to-income requirement for qualified mortgages, replacing it with a price-based approach. It is also seeking feedback on extending the QM Patch for Fannie Mae and Freddie Mac.