The CFPB on Tuesday issued a notice of proposed rulemaking to create a new category of seasoned qualified mortgages in an effort to encourage innovation and help ensure access to responsible and affordable mortgages in the credit market.
To be considered a seasoned QM under the proposal, loans would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period, according to a statement by the CFPB.
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. In addition, 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.
“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,” said Kathleen Kraninger, CFPB director.
Tuesday’s rule follows two other proposed new rules issued in June 2020 regarding QMs. The first proposes to amend the general QM definition in Regulation Z to replace the DTI limit with a price-based approach, while the second proposes to amend Regulation Z to extend a temporary QM definition known as the Government-Sponsored Enterprise Patch to expire upon the effective date of the final rule proposed in the first proposed rule, according to the CFPB.
The proposed rule can be accessed by clicking here.