The Consumer Financial Protection Bureau is proposing a new category of qualified mortgages called Seasoned QM, which would require loans to meet certain performance requirements over a 36-month seasoning period.

The CFPB said they hope this new category will “encourage innovation and help ensure access to responsible, affordable mortgage credit.”

In order to qualify as a Seasoned QM, loans would have to be first-lien, fixed rate transactions that comply with general restrictions on product features and points and fees and meet certain underwriting requirements.

During the seasoning period, creditors would have to hold these loans on portfolio. In addition, to be eligible to become a Seasoned QM, creditors must have considered and verified the consumer’s debt-to-income ratio (DTI) or residual income at origination.

The performance requirements for Seasoned QM mean that covered transactions can have no more than two 30-day delinquencies and no delinquencies of 60 or more days at the end of the seasoning period.  Significantly in this COVID-19 environment, the CFPB notes that “should there be a disaster or pandemic-related national emergency and as long as certain conditions are met, the proposal would not disqualify a loan from becoming a Seasoned QM for the failure to make full contractual payments if the consumer receives a temporary payment accommodation.”

“Today’s proposal continues the Bureau’s work to encourage safe and responsible innovation in the mortgage origination market,” said CFPB Director Kathy Kraninger. “Our goal through our very deliberative rulemaking process is to protect, promote and preserve the financial well-being of American consumers while at the same time offering access to responsible, affordable mortgage credit.”

The CFPB has already issued two other notices of proposed rulemaking this summer: one amending the QM definition in Regulation Z that eliminates the DTI requirement, and the other extending the QM Patch.