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CFPB and the Qualified Mortgage Patch

The Consumer Financial Protection Bureau recently issued an Advance Notice of Proposed Rulemaking (ANPR) seeking information relating to the expiration of the temporary qualified mortgage provision applicable to certain mortgage loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac, in the Bureau’s Ability to Repay/Qualified Mortgage (ATR/QM) Rule also known as the GSE patch. The Patch is scheduled to expire no later than Jan. 10, 2021. 

The CFPB is soliciting comments on possible amendments to the Patch through the ANPR, including whether to revise Regulation Z’s definition of a qualified mortgage in light of the Patch’s scheduled expiration. The ANPR seeks information and comment on whether the definition of qualified mortgage should retain a direct measure of a consumer’s personal finances (for example, debt-to-income ratio), and whether the definition should include an alternative method for assessing financial capacity.  

“Loans backed by Fannie Mae and Freddie Mac make up a large portion of the U.S. mortgage market,” said CFPB Director Kathleen L. Kraninger. “The national mortgage market readjusting away from the Patch can facilitate a more transparent, level playing field that ultimately benefits consumers through stronger consumer protection. We want to hear all perspectives on how to move beyond the GSE Patch, the impact on credit, the role of the private mortgage market, and possible modifications to the definition of qualified mortgages and the rules governing the documentation of debt and income. The Bureau is committed to ensuring a smooth and orderly mortgage market throughout its consideration of these issues and any resulting transition away from the GSE Patch.”

Earlier this year, the CFPB announced that it would be focusing its attention on the Patch, on loans that are eligible to be purchased or guaranteed by either Fannie Mae or Freddie Mac. While proponents of the QM Patch say that its expiry in 2021 would make homes less affordable, especially in the lower-tier housing market, an article in Forbes points out that if the Trump administration wants to improve housing affordability, "it needs to expand the role of private markets through increased competition."

Writing for Forbes, Norbert Michael, Director of the Center for Data Analysis at The Heritage Foundation, said in the report that the CFPB should announce that the patch will expire at its scheduled time in 2021. "Then, the Bureau can start working on improving the QM and Appendix Q, rules that are likely holding back private lenders," Michael wrote.

About Author: Seth Welborn

Seth Welborn is a Harding University graduate with a degree in English and a minor in writing. He is a contributing writer for MReport. An East Texas Native, he has studied abroad in Athens, Greece and works part-time as a photographer.
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