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Home appraisal’s ugly history and uncertain future

This is Part I of a deep dive into the home appraisal industry. Today we explore the origins of the appraisal industry and its current lack of diversity.

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Politics & Money

CFPB delays QM compliance date to October 2022

Also extends the QM Patch for 15 months

The Consumer Financial Protection Bureau released a notice of proposed rulemaking on Tuesday to delay the mandatory compliance date of the Qualified Mortgage final rule from July 1, 2021 to October 1, 2022.

“At a time when so many consumers are struggling and at risk of losing ground, particularly Black and Hispanic consumers, we need to do all we can to help people stay in their homes and to ensure the availability of responsible, affordable mortgages,” said CFPB Acting Director David Uejio. “In proposing to extend the date by which lenders must comply with the CFPB’s new General QM definition, we are working to provide needed options for both homeowners and lenders during a time of uncertainty and hardship.”

The CFPB just issued its final rulings on QM in December, which established a pricing threshold that effectively replaced the debt-to-income limit of 43% with a price-based approach that gives lenders relief for loans capped at 150 basis points above the prime rate.

The Ability to Repay/QM rule was enacted by the CFPB after the financial crisis and requires lenders to verify a borrower’s ability to repay the mortgage before lending them money. But Fannie Mae and Freddie Mac are not bound to this requirement, a condition known as the QM Patch.

The QM Patch was set to expire in January 2021, but the bureau decided to extend the QM Patch in October, until “the mandatory compliance date for the new QM.” With this newest announcement, that date is now pushed out to October 2022.

In its statement on the extension, the bureau notes: “Extending the mandatory compliance date of the General QM final rule would allow lenders more time to offer QM loans based on the homeowners’ debt-to-income (DTI) ratio, and not solely based on a pricing cut-off. Extending the compliance date of the General QM final rule would also give lenders more time to use the GSE Patch, which provides QM status to loans that are eligible for sale to Fannie Mae or Freddie Mac.”

Amending the QM Rule has been a long process. Last January the CFPB told  Congress of its intention to propose an amendment to the QM Rule that would “move away” from debt-to-income ratio as a factor in mortgage underwriting. In June, the Bureau made good on that plan, and set the expiration date for the QM Patch at January 2021, before it decided to extend the QM Patch in October, and today.

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