On 8/18/2020, the CFPB issued a proposal to create a new category of seasoned qualified mortgages, referenced as “Seasoned QMs.” According to the CFPB’s release, loans could qualify as Seasoned QMs if they are “first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period.”
In their release, the CFPB explains several other highlights of Seasoned QMs:
Covered transactions would have to be held in a creditor’s portfolio during a “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, a creditor must consider and verify the consumer’s debt-to-income ratio or residual income at origination.
Sesoned 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.
If there should be a disaster or pandemic-related national emergency and as long as certain conditions are met, the proposed rule 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.
This is the third QM-related announcement from the CFPB released over the last few months. The first proposal - released in June of 2020 - attempts to amend the General QM definition in Reg Z to replace the DTI limit with a price-based approach. The second proposal attempts to amend Reg Z to extend the temporary GSE definition (known as the Goverment-Sponsored Enterprise Patch), which is expected to expire before the CFPBs proposed fix would become effective.
The bottom line here is that financial instituions should be ready for several final changes to the Qualified Mortgage rules over the next several months.
The CFPB’s newest proposal (on Seasoned QMs) can be found here.
