Compliance Blog

In December 2020, the CFPB finalized two changes to the qualified mortgage (QM) rule (we blogged about these rules here and here). These rules, in part, changed the definition of a general QM from a standard that has a 43% debt-to-income (DTI) cap to a price-based standard that compares a loan’s annual percentage rate (APR) to the average prime offer rate (APOR) to determine if that loan is a QM. This change was effective March 1, 2021 with a mandatory compliance deadline of July 1, 2021. The bureau also indicated  Temporary Government Sponsored Enterprise (GSE) QM loan category (Temporary GSE QM or “GSE Patch”) would expire the earlier of July 1, 2021 or the date that the GSEs exit conservatorship. Last month, acting director of the CFPB Dave Uejio issued a statement outlining some of the bureau’s priorities under the new administration, which included reviewing how to maintain the “status quo” regarding the QM rule. 

In a first key step towards revisiting these changes, on March 5, 2021, the bureau issued a notice of proposed rulemaking to delay the mandatory compliance date of changes to the general QM definition until October 1, 2022. For applications received on or after March 1, 2021 and before October 1, 2022, credit unions would have the option to comply with the new APOR-based general QM definition or the previous DTI-based definition that was in effect prior to March 1, 2021. Credit unions could utilize the GSE Patch until the proposed October 1, 2022 mandatory compliance date, or the date of the GSEs exiting conservatorship, whichever is earlier.

It should be noted that although the proposal is allowing the GSE Patch to remain in place until the proposed date, the Federal Housing Finance Agency (FHFA)  announced amendments to the Preferred Stock Purchase Agreements (PSPA) for the GSEs. The terms of the PSPA limit the GSEs acquisition of loans on or after July 1, 2021 to those that are under the APOR-based general QM definition, the seasoned QM definition, small creditor portfolio loans, and certain balloon-payment QMs.

One thing to note, the proposal makes no substantive changes to the general QM definition although the bureau may reconsider the rule at a later date. The bureau also indicated it would revisit the seasoned QM rule, which the bureau published in December 2020. This rule would require loans to meet certain performance standards over a 36-month seasoning period, after which the loan would be entitled to the safe harbor of compliance with the ability-to-repay (ATR) requirements.

NAFCU members can find more details and share feedback about the proposal through our Regulatory Alert on the proposal, available here. Comments are due to the CFPB by April 5, 2021 and NAFCU members can provide us their feedback until April 2, 2021.

Regulatory Compliance School Kick Off. Thanks to the many credit union professionals who will be joining us over the next two weeks for our second Virtual Regulatory Compliance School! Sessions kick off tomorrow, and I look forward to virtually meeting those of you who are attending and having you join hundreds of other NAFCU Certified Compliance Officers (NCCOs). If this time did not work out for you, no worries, we have a second opportunity available in August.