In a new report, the Congressional Research Service ("CRS") reviewed the evolution of the CFPB's Qualified Mortgage ("QM") Rule and the recently amended requirements on "ability-to-repay." (See previous coverage.)
On December 29, 2020, the CFPB issued final rules broadening the scope of the definition of QMs under Regulation Z ("Truth in Lending Act") in order to increase the likelihood that lower-income borrowers would be able to obtain mortgages by expanding the types of mortgages that government-sponsored enterprises may purchase. One of the new rules replaced the 43-percent limit on a consumer's debt-to-income ratio ("DTI") with requirements based on mortgage pricing that reflects the credit quality of borrowers. The CRS stated that this change was implemented after the CFPB found that the DTI cap restricted credit access.
The CRS also reviewed how the CFPB revisited the QM definitions "to possibly achieve a better balance between ensuring a consumer's ability to repay and have access to affordable mortgage credit," and described the removal of Appendix Q ("Standards for Determining Monthly Debt and Income") after the CFPB found that originators "perceived" the appendix as lacking clear legal protection. The CRS noted that the incoming acting director of the CFPB "has raised concerns about the revised QM rule, directing the CFPB staff to [e]xplore options for preserving the status quo."
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