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CFPB Wants Your Comments on New Kind of QM

Wednesday, August 19, 2020

The Consumer Financial Protection Bureau (CFPB) is proposing a new category of qualified mortgage (QM) which it says is intended to "encourage innovation and help ensure access to responsible, affordable in the mortgage credit market." (we assume they meant "affordable credit in the mortgage market.")  The category, "seasoned qualified mortgages" involves, as the name suggests, holding riskier loans in the originator's own portfolio for three years. It is unclear, from the notice of proposed rulemaking (NPRM) issued on Wednesday, who will then assume or securitize the loans. To be considered a Seasoned QM under the proposal, loans would have to be first-lien, fixed-rate covered transactions that have met certain performance requirements over a 36-month seasoning period. In addition to the in-portfolio requirement, the loan must comply with general restrictions on product features and points and fees and meet certain underwriting requirements. These include that the creditor verify the consumer's debt-to-income ratio (DTI) or residual income at origination and during the seasoning period.   

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