CFPB extends sunset date for the GSE patch

On October 20, 2020 the Consumer Financial Protection Bureau (CFPB) finalized a rule extending the expiration date of certain “temporary” qualified mortgages (QM) also called the government sponsored entity (GSE) patch. This type of QM had a sunset date of January 10, 2021. Rather than extend this deadline to a specific date, this rule is effective until the bureau finalizes additional changes to the ATR/QM rule, or when the GSEs exit conservatorship, whichever occurs first.

As background, the Dodd-Frank Act and section 1026.43 of Regulation Z require credit unions to make a reasonable, good faith determination that a borrower has the ability to repay (ATR) any consumer credit transaction that is secured by a dwelling, with some exceptions (e.g. home equity lines of credit). This involves consideration of eight specific underwriting factors. If a loan meets certain criteria, it is a QM and is considered to be in compliance with the ATR requirements. Currently, there are four types of QMs in the regulation:

  • General QM, where the debt-to-income ratio is capped at 43%;
  • Small creditor portfolio QM;
  • Small creditor balloon-payment QM; and
  • Temporary QM, which must be eligible to be purchased by Fannie Mae or Freddie Mac (the GSE patch)

Note – a fifth category of QM was added by statute in 2018 and has not been implemented into the regulation.


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