On April 27, 2021, the CFPB issued a final rule delaying the mandatory compliance date of the December 2020 amendments to the General QM rule (“Amended General QM Rule”), from July 1, 2021 to October 1, 2022. This rule is effective as of June 30, 2021.
The final rule amends Comments 43-2, 43(e)(2)-1 and 43(e)(4)-2 and -3 of the QM Rule. Specifically, it amends Comments 43-2 and 43(e)(4)-2 and -3 to reflect a delay of the mandatory compliance date from July 1, 2021 to October 1, 2022.
The final rule also adds new comment 43(e)(2)-1 to clarify that the General QM loan definitions is available to creditors for applications received on or after March 1, 2021, but prior to October 1, 2022. For covered transactions for which creditors receive an application on or after March 1, 2021, but prior to October 1, 2022, creditors will have the option of complying with either the original QM rule, based on the 43% DTI threshold (“Original General QM Rule”) definition, or the Amended General QM Rule, based on pricing thresholds. For covered transactions for which creditors receive an application on or after October 1, 2022, only the Amended General QM Rule will be available.
As a consequence of the final rule the expiration of the Temporary GSE QM Loan category (“GSE Patch) for loans eligible for purchase by Fannie Mae and Freddie Mac (collectively the “GSEs”), would be extended and expire on the earlier of October 1, 2022, or the date the applicable GSE exits federal conservatorship.
In an interesting twist, however, on April 8, 2021, Fannie Mae and Freddie Mac issued Lender Letter LL-2021-09 and Bulletin 2021-13 (respectively) stating that due to the January 14, 2021 amendments to their respective senior preferred stock purchase agreement (“PSPA”) with the U.S. Department of Treasury, they are required to only to purchase loans that meet the Amended General QM Rule definition by July 1, 2021. As a result, the GSEs state that they will not be able to purchase loans that are GSE Patch loans that do not meet the Amended General QM Rule, unless the loans:
- have application dates on or before Jun. 30, 2021, and
- are purchased as whole loans on or before Aug. 31, 2021, or in MBS pools with an issue date on or before Aug. 1, 2021.
The CFPB in the final rule acknowledged that the PSPAs may affect the availability of the GSE Patch on or after July 1, 2021, if the PSPAs will not be amended again.
Lastly, in the final rule preamble the CFPB reiterates its intention to review the General QM loan definition in the Amended General QM Rule and to reconsider whether additional revisions to the definition are required, and if so, propose such amendments through future proposed rule.
Given that the GSEs are the purchasers of the vast majority of mortgage loans originated, if the PSPAs will not be amended again it is likely that the GSE Patch as available today will only be available until June 30, 2021 for loans sold within the timeframe required by the GSEs letters.
In that case, on or after July 1, 2021 and until September 30, 2022, many lenders will likely only originate GSE Patch loans that also meet the Amended General QM Rule definition. So, for example, loans with 43% DTI meeting Appendix Q requirements would not be eligible for sale to the GSEs and thus would not be covered by the GSE Patch.
Outlets for such, “ineligible” QM loans may be available, however, through private investors or through Federal Home Loan Banks mortgage purchase programs through member institutions.
If you have any questions concerning this final rule and its implications, please contact Solomon Maman.Download Related Document Download Related Document Download Related Document