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HPC: Delaying final QM Rule “not in public interest”

Housing Policy Council sends comment letter to CFPB

The Housing Policy Council sent a letter to the Consumer Financial Protection Bureau on Tuesday expressing its opposition to delaying the implementation of the Final QM Rule and expiration of the 2013 QM Rule, set to take effect on July 1, 2021. On March 4, the CFPB released a notice of proposed rulemaking to delay the compliance date for the QM Rule until Oct. 1, 2022 and opened up a comment period.

The CFPB just issued its final rulings on QM in December after an arduous two-year process of gathering comments and reaching a compromise. The final rule 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 HPC letter outlines why it opposes delaying the implementation of the Final QM Rule, including:

  • The 2020 General QM Rule resulted from an extensive and disciplined rulemaking process that reflects the thorough analysis and public input required under the Administrative Procedure Act;
  • The Bureau has not provided a sufficient rationale for delaying implementation, given the more expansive access to credit provided under the 2020 General QM Rule relative to the 2013 QM Rule;
  • The benefits of implementing the 2020 General QM Rule outweigh the benefits of delaying expiration of the 2013 QM Rule, as evidenced by the Bureau’s data and analysis; and
  • Delayed expiration of the 2013 QM Rule, in order to facilitate reconsideration of the 2020 General QM Rule, is not in the public interest.

The trade organization’s letter states: “We also are concerned that the Proposed Rule’s real purpose is to set the stage for the Bureau to reopen the 2020 General QM Rule. We firmly believe that reopening the 2020 General QM Rule would not be in the public interest.

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“As noted above, the 2020 General QM Rule was a product of prolonged and in-depth deliberation by the Bureau that included input from all stakeholders. That deliberative process demonstrated that there are no alternatives that will expand access to safe, affordable, and well-underwritten QM loans in the manner that the 2020 General QM Rule can.

“Each of the alternatives considered as part of that rulemaking created new constraints on access to credit and operational complications that would make it more difficult to assist traditionally underserved segments of the population. If the Bureau wants to explore modifications to the 2020 General QM Rule, it should follow the standard APA rulemaking process, without delaying the mandatory compliance date.”

When the Bureau announced its proposal to delay the rule, it cited concern for homeowners affected by the pandemic. “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 March. “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.”

However, the HPC takes issue with that reason for the delay, noting that all loans deemed QM under the 2013 rule are deemed QM under the Final Rule.

“There is no nexus between the pandemic-related issues facing the mortgage market and replacement of the 2013 QM Rule with the 2020 General QM Rule, and the Bureau does not establish one in the Proposed Rule,” the HPC letter states.

In addition, the HPC letter challenges the CFPB’s statement that “consumers who need to sell their homes may benefit from a broader QM definition that encourages more potential purchasers to enter the market and buy properties that might otherwise go into foreclosure.”

The HPC notes “the observable market dynamic” of high home demand, which would provide a ready market for any consumers who need to sell, especially given the positive equity position many homeowners are in as home prices continue to appreciate.

Over the letter’s nine pages, the HPC notes several times that the CFPB has not provided data to substantiate its claims that consumers would benefit from delaying the Final Rule. For example, the letter states:

“The Bureau suggests that an additional 33,000 consumers could benefit from the proposed delay. However, the Bureau has not provided any data or evidence to support this estimate. In contrast, the administrative record in support of the 2020 General QM presents a material positive impact on consumers. The new QM rule would expand access to credit to almost 1 million consumers and will also cover borrowers who were previously deemed QM under the Temporary GSE QM definition. In addition, the Bureau has not properly considered the costs to covered persons that the delay will create – mainly from the uncertainty that will result.”

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 2020, until “the mandatory compliance date for the new QM.” 

In January 2020, 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 then again on March 4.

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