CFPB Issues Final Rule on Extending the GSE Patch

The Consumer Financial Protection Bureau (Bureau) issued a final rule that will extend the Government-Sponsored Enterprise (GSE) Patch until the mandatory compliance date of a final rule amending the General Qualified Mortgage (QM) loan definition in Regulation Z.

The GSE Patch had been slated to expire on Jan. 10, 2021. The CFPB announced that it would not amend the provision in Regulation Z that states the GSE Patch will expire if Fannie Mae and Freddie Mac exit conservatorship.

The CFPB issued a proposal to amend the General QM loan definition on June 22, the same day it issued a proposal to extend the GSE Patch. The agency is now developing a final rule amending the General QM loan definition, adding that it plans to issue this rule at an unspecified later date.

“In releasing the final rule, the Bureau is taking steps to ensure a smooth and orderly transition away from the GSE Patch and to maintain access to responsible, affordable mortgage credit upon its expiration,” the CFPB said in a press statement. “Further, the Bureau is taking this action to ensure that responsible, affordable credit remains available to consumers who may be affected if the GSE Patch expires before the mandatory compliance date of a final rule amending the General QM loan definition.”

The GSE Patch was created as part of the CFPB’s 2013 Ability-to-Repay/Qualified Mortgage (ATR/QM) rule, which established a general QM standard for loans where the consumer’s debt-to-income (DTI) ratio is 43% or less and that meet various other requirements. The CFPB estimated that approximately 957,000 mortgage loans would be affected by the expiration of the GSE Patch, adding that some of these loans would either not be originated or would be more expensive for borrowers.

A proposed rule was issued on Aug. 18 that would have created a new QM category within the ATR/QR rule. The CFPB stated it would issue a final rule related to this proposal at a later date.