A coalition of mortgage lenders ("coalition") and SIFMA made separate recommendations to the CFPB on proposed revisions to the definition of "Qualified Mortgage" ("QM") in Regulation Z (the "Truth in Lending Act").

As previously covered, the CFPB is considering amending the definition of QM in advance of the January 2021 expiration of the temporary provision (the "GSE Patch") in the Ability to Repay ("ATR") / Qualified Mortgage Rule. (The GSE Patch allows certain mortgage loans to be eligible for purchase or guarantee by Fannie Mae and Freddie Mac.)

The coalition proposed a revised definition of QM intended to "avoid market disruption" and ensure that "creditworthy" borrowers can continue to access sustainable loans. Specifically, it advised the CFPB to:

  • eliminate the debt-to-income ("DTI") ratio requirement and the related Appendix Q from the general QM category;
  • improve the existing ATR regulatory language; and
  • continue the current QM statutory safe-product restrictions that limit certain risky loan features and clarify provisions concerning the documentation and verification of income.

SIFMA urged the CFPB to clarify regulations concerning (i) the definition of QM and (ii) how to qualify for the status of a QM. Additionally, SIFMA recommended that the CFPB:

  • consider other factors instead of the DTI ratio for mortgage success, such as residual income, assets or loan-to-value ratio; and
  • automate the income verification process.

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