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The CFPB Tuesday issued a proposed rule to create a new category of seasoned qualified mortgages (QM). Bureau Director Kathy Kraninger announced the proposal during Tuesday's Women in Housing and Finance event, which was attended by NAFCU.

In a release, the bureau said the new category is meant "to encourage innovation and help ensure access to responsible, affordable loans in the mortgage credit market."

To qualify as a seasoned QM under the proposal, loans must be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. 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.

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 (DTI) or residual income at origination. 

Seasoned QMs would only be available for covered transactions that have no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period. Should there be a disaster or pandemic-related national emergency and as long as certain conditions are met, the proposal would not disqualify a loan from becoming a seasoned QM for the failure to make full contractual payments if the consumer receives a temporary payment accommodation.

The CFPB in June issued two notices of proposed rulemaking related to the General QM definition and upcoming expiration of the Government-Sponsored Enterprises Patch (GSE) QM Patch. NAFCU has continuously highlighted credit unions' concerns about having to hold non-QM loans on their balance sheets and warned against using an average prime offer rate approach. The association recently reiterated its call for the CFPB to allow for an 18 to 24 month extension of the GSE patch, at a minimum.

A recent post on NAFCU's Compliance, Risk & BSA and Lending Networks provides insights into the association's recent CFPB advocacy. Kraninger is slated to speak at NAFCU's upcoming Virtual Congressional Caucus; learn more about the event and register now.