The proposed rule would add a path to QM safe harbor qualification through “seasoning.”

The Mortgage Bankers Association, in a letter to the Consumer Financial Protection Bureau, offered several recommendations in response to the Bureau’s request for comment on its proposed rule creating a new category of “seasoned” Qualified Mortgage loans. The CFPB proposal would amend Regulation Z by creating a new “seasoning” path to QM status. The proposed rule would add a new path to QM safe harbor qualification through a demonstrated record of timely payments by the borrower following origination, also known as loan “seasoning.” To qualify as a Seasoned QM, the originating institution must hold the loan in portfolio for at least 36 months (i.e., the “seasoning period”), with limited exceptions. During the seasoning period, the loan must have no more than two delinquencies of 30 or more days and no delinquencies of 60 or more days. Eligibility for the Seasoned QM category is limited to fixed-rate, fully amortizing loans, with no balloon payments, terms not exceeding thirty years, and total points and fees normally not exceeding 3 percent of the loan amount (with some variations for smaller loan sizes). In comments to the CFPB, MBA President & CEO Robert Broeksmit, CMB, said MBA generally supports the restrictions on loan product features reflected in the proposal. Recommendations include -- extending the eligibility for subordinated loans, broadening the "held in portfolio requirement," and extending eligibility to loans originated prior to the effective date.

Source: MBA