MBA Statement on CFPB Letter to Congress on QM Standard

On Jan. 17, Consumer Financial Protection Bureau Director Kathy Kraninger sent a letter to members of Congress, signaling proposed changes to the current Qualified Mortgage standard.

In the letter, Kraninger noted The Bureau is currently in the middle of a rulemaking process to address the QM standard, as the “GSE Patch” is scheduled to expire in January 2021. Kraninger said the Bureau “has decided to propose an amendment…[to] move away from DTI and instead include an alternative, such as a pricing threshold…” Kraninger also indicates that the Bureau expects to extend the GSE Patch for “a short period” to facilitate the implementation of the QM changes.

Additionally, Kraninger said the Bureau is also exploring a new seasoning approach to grant QM safe harbor to loans for which “the borrower has consistently made timely payments for a period.”

Mortgage Bankers Association President and CEO Bob Broeksmit, CMB, issued a statement on Jan. 21.

“MBA appreciates CFPB Director Kathy Kraninger’s intention to temporarily extend the GSE patch and move away from the use of a standalone debt-to-income ratio,” Broeksmit said. “MBA has urged the Bureau to eliminate the use of DTI ratios as a standalone threshold in the QM definition, which would also remove the need to use the rigid, outdated Appendix Q methodology for calculating borrower income and debt. We look forward to working with the Bureau, and other stakeholders, on the proposed rule.”

In a Sept. 16 letter to the CFPB, MBA urged the Bureau to eliminate use of DTI ratios as a standalone threshold in the QM definition, which would also remove the need to use the rigid, outdated Appendix Q methodology for calculating borrower income and debt.

The Bureau is expected to issue a formal proposal no later than May.