It establishes higher pricing thresholds for lower loan amounts, subordinate lien loans, and manufactured housing loans. For first lien loans with a loan amount greater than or equal to $110,260, this threshold is 2.25%. Under the new price-based approach, a loan is eligible for General QM status if its APR does not exceed the APOR for a comparable transaction as of the date the interest rate is set by the amounts set forth in the regulation. It does not change the existing General QM product feature and points-and-fees requirements. It also removes Appendix Q and clarifies the “consider and verify” requirements and their related commentary. In addition to stating that a price-based approach provides a more holistic measure of a consumer’s ability to repay than DTI alone, the CFPB also maintains that a bright-line pricing rule will provide more compliance certainty to creditors that a loan meets the General QM requirements. The General QM Final Rule removes the 43% DTI ratio limit and replaces it with a priced-based approach. In addition, the Seasoned QM Final Rule clarifies that a high-cost mortgage under HOEPA is not eligible for Seasoned QM status. One key difference in the Seasoned QM Final Rule versus the proposed rule is that a loan can meet the seasoned QM criteria even if it is sold once during the seasoning period, provided it is not securitized. As part of the “consider” requirements, a creditor must maintain written policies and procedures, and documentation of their application, around how it considers a consumer’s income or assets and debts. The Final Rule adds a new pricing threshold specific to smaller loans secured by manufactured homes. Under the General QM Final Rule, the pricing threshold is 2.25% (an increase from the 2% threshold that was originally proposed). Some Key Differences Between the Proposed Rules and Final Rulesīoth rules were largely finalized as proposed with a few key differences. The GSE Patch sunsets on the mandatory effective date of the General QM Final Rule, meaning it remains available for covered transactions for which a creditor receives an application before J(unless the GSEs cease to operate under conservatorship before that date). For covered transactions for which an application is received on or after July 1, 2021, the loan would need to satisfy the new General QM definition to achieve General QM status. This means that for covered transactions for which an application is received on or after the effective date, but prior to the mandatory effective date, a loan could be eligible for General QM status either by satisfying the existing requirements or the new requirements. The CFPB is allowing for an “optional early compliance period” for the General QM Final Rule, meaning that creditors may begin complying with the new General QM requirements on the effective date, but are not required to comply until the mandatory effective date of July 1, 2021. 1 The Seasoned QM Final Rule applies to covered transactions for which the creditor receives an application on or after the effective date. The General QM Rule and Seasoned QM Final Rule take effect 60 days after publication in the Federal Register. These Final Rules, together with the Final Rule issued in October that sunsets the GSE Patch on the mandatory effective date of the General QM Final Rule, are the culmination of the CFPB’s rulemaking efforts in the QM space and establish the new QM landscape moving forward. On December 10, 2020, the CFPB published two final rules related to Qualified Mortgages (QMs) which: 1) amend the definition of a General QM by removing the 43% DTI threshold and replacing it with a price-based test (the “ General QM Final Rule”) and 2) allow loans that meet certain criteria to season into safe harbor QM status (the “ Seasoned QM Final Rule”).
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