Housing market

Latest Developments on the ATR/QM Rule

The Consumer Financial Protection Bureau (CFPB) is proposing a change to its Ability-to-Repay/Qualified Mortgage (ATR/QM) rule.

In a letter to Sen. Mike Rounds (R-SD), chairman of the Senate Subcommittee on Financial Institutions and Consumer Protection, CFPB Director Kathleen Kraninger noted her agency’s Advanced Notice of Proposed Rulemaking (ANPR) regarding the ATR/QM rule, pointing out the QM requirement that the consumer’s debt-to-income ratio (DTI) cannot exceed 43 percent and adding that standard is not necessary for loans that qualify for the GSE Patch (also known as the QM Patch) which is set to expire in January 2021.

Kraninger informed Rounds that based on the ANPR input, the CFPB “has decided to propose an amendment to the Rule which would move away from DTI and instead include an alternative, such as a pricing threshold (i.e., the different between the loan’s annual percentage rate (APR) and the average prime offer rate (APOR) for a comparable transaction). The proposed alternative would be intended to better ensure that responsible, affordable mortgage credit remains available to consumer in a manner consistent with the purposes of Sections 129B and C of the Truth-in-Lending Act (TILA) and to facilitate compliance with those sections.”

Kraninger also stated that the CFPB expects to propose extending the QM Patch expiration “for a short period” until either the proposed alternative is put into place of the government-sponsored enterprises exit federal conservatorship. A Notice of Proposed Rulemaking on this matter is being planned for no later than May, Kraninger added.

Furthermore, Kraninger said the CFPB was considering an addition to the existing rule that offered a “seasoning” approach that would “create an alternative pathway to QM safe-harbor status for certain mortgages when the borrower has consistently made timely payments for a period.”

Mortgage Bankers Association (MBA) President and CEO Bob Broeksmit welcomed Kraninger’s ideas.

“MBA appreciates CFPB Director Kathy Kraninger’s intention to temporarily extend the GSE patch and move away from the use of a standalone debt-to-income ratio,” Broeksmit said in a statement. “MBA has urged the Bureau to eliminate the use of DTI ratios as a standalone threshold in the QM definition, which would also remove the need to use the rigid, outdated Appendix Q methodology for calculating borrower income and debt. We look forward to working with the Bureau, and other stakeholders, on the proposed rule.”

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