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LendingLife: New General QM Rule up in the air

The CFPB has its eyes on the future of the 2020 General QM Rule

This post originally appeared in HousingWire’s LendingLife newsletter. LendingLife is a daily digest of the most important news and commentary edited and curated exclusively for mortgage loan originators. Join the community!


Hello, LOs!

How would you like to be questioned by Congress on Day 13 of your new job?

That’s what happened to Consumer Financial Protection Bureau Director Rohit Chopra on Wednesday. Lawmakers questioned Chopra for more than two hours about his plans for the regulator.

Chopra said he has given a lot of thought to making sure that the agency is not only going after small businesses, but the largest firms. He criticized his last gig, at the Federal Trade Commission, for letting Google and Facebook “off the hook.”

“I don’t want to repeat that at the CFPB,” he said.

One outstanding matter that many in the mortgage industry wants resolved is the future of the 2020 General QM Rule.

Asked pointedly about whether he supported the rule, Chopra answered “I don’t know,” and changed the subject to how the CFPB could spur refinances in the market.

Here’s a brief recap: The CFPB proposed a new General QM Final Rule in 2020, after a long rulemaking process.

It did away with the 43% debt-to-income ratio limit in favor of more flexible pricing guidelines. A loan received a “conclusive presumption that the consumer had the ability to repay if the annual percentage rate does not exceed the average prime offer rate for a comparable transaction by 1.5 percentage points or more as of the date the interest rate is set,” the CFPB said at the time. As long as the annual percentage rate exceeds the average prime offer rate for a comparable transaction by 1.5 percentage points or more but by less than 2.25 percentage points, the ability to repay status was secure.

The General QM Final Rule also allowed jumbo loans to get QM status, provided additional ways to verify income or assets, and expanded the category of QM to encompass seasoned loans that have mostly no defaults for three years.

But just a couple of months later, the CFPB delayed the compliance date until Oct. 1, 2022 — giving rise to speculation that their intention was not to provide additional flexibility for the market, as the regulator said at the time, but to re-open the rulemaking process.

In response to the change, some of the largest lenders swiftly introduced new jumbo QM products. But sources tell HousingWire that few lenders have the stomach to introduce new products if QM jumbo loans, the safe harbor for seasoned loans and other flexibilities are on the chopping block anyway.

Chopra’s response at the Congressional hearing hardly reduced those anxieties.

LendingLife readers – do you see any problems with extending a safe harbor to some purchase loans that don’t have serious defaults for three years, as this senior advisor to Chopra does? Who wins by putting off the mandatory compliance date?

Today’s Spotlight Articles:

Rohit Chopra pleads the fifth on QM rule

Private-label market filled the void created by PSPA changes

Industry and housing groups expect big things from FHFA

White paper: Can Lenders Catch Up to Consumer Demand in 2022?

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