Proposed Rulemaking Could End Qualified Mortgage Patch

August 12, 2019
The patch is currently set to expire no later than January 10, 2021.


The Consumer Financial Protection Bureau issued an Advance Notice of Proposed Rulemaking that would end the temporary Qualified Mortgage "Patch" applicable to certain mortgage loans eligible for purchase or guarantee by Fannie Mae and Freddie Mac. The ANPR refers to the Bureau's Ability to Repay/Qualified Mortgage rule, also known as the QM "Patch," which is slated to expire no later than Jan. 10, 2021. The ANPR states that the Bureau currently plans to allow the QM Patch to expire in January 2021 or after a short extension, if necessary, to facilitate a smooth and orderly transition. The ANPR solicits comments on possible amendments to the ATR/QM Rule, including whether to revise Regulation Z's definition of a QM in light of the QM Patch's scheduled expiration. The ANPR seeks information and comment on whether the definition of QM should retain a direct measure of a consumer's personal finances (for example, debt-to-income ratio), and whether the definition should include an alternative method for assessing financial capacity. The Dodd-Frank Act amended the Truth in Lending Act to establish ability-to-repay requirements for most residential loans. TILA identifies factors a creditor must consider in making a reasonable and good faith assessment of a consumer's ATR. TILA also defines a category of loans called QM for which creditors may presume compliance with the ATR requirements. The Mortgage Bankers Association has long-advocated for improvements to the QM Patch. At the MBA National Secondary Market Conference in New York recently, MBA President and CEO Robert Broeksmit, CMB, said such improvements would put private capital on a more level playing field with Fannie Mae and Freddie Mac. 

Source: Mortgage Bankers Association