Tom Hutchens on GSE guidelines and the non-QM market
Today’s HousingWire Daily features an interview with Tom Hutchens, Angel Oak Mortgage Solutions’ executive vice president of production. In this episode, Hutchens talks about the reignited non-QM market, how new GSE guideline updates to Fannie Mae and Freddie Mac will increase supply for the non-QM sector, and what that means for the market at large.
For some background on the interview, here’s a brief summary of HousingWire’s latest coverage on the new GSE updates:
In Lender Letters issued on Thursday, Fannie Mae and Freddie Mac confirmed that loans purchased by the GSEs with application dates on and after July 1, 2021, must meet the standards of the Consumer Financial Protection Bureau’s Revised Qualified Mortgage Rule.
In the letters, the two government sponsored enterprises state that they will follow the directive laid out in their amended Preferred Stock Purchase Agreements with the Treasury Department, which forbid Fannie and Freddie from buying QM loans under the GSE Patch.
The guidelines in the letters stand in contrast to the CFPB’s most recent notice of proposed rulemaking, which seeks to delay the date lenders have to comply with the revised QM rule until October 1, 2022.
The CFPB final QM rule, issued in December, establishes a pricing threshold that effectively replaced the former 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.
Before the revised QM was finalized, many lenders were able to circumvent the 43% DTI limit because the rule doesn’t apply to mortgages backed by the GSEs. This “QM Patch” would expire with the new rule going into effect on July 1. The CFPB threw a wrench into this timeline with their proposed rulemaking, but both Fannie and Freddie are bound by the amended PSPAs with Treasury.
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