Dear Boards of Directors and Chief Executive Officers:
On April 30, 2021, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register a final rule (April 2021 final rule) (opens new window) amending the Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) in Regulation Z.1
With some exceptions, Regulation Z requires lenders to make a reasonable, good-faith determination of a consumer’s ability to repay any residential mortgage loan. Loans that meet Regulation Z requirements for qualified mortgages obtain certain protections from liability. Regulation Z contains several categories of QMs, including the General QM category and the Temporary Government-Sponsored Enterprise (GSE) QM category. This final rule affects two categories of QMs:
- General QMs: Extends the mandatory compliance date of General QM loans from July 1, 2021, to October 1, 2022, to preserve flexibility for consumers, particularly those affected by the COVID-19 pandemic. The final rule does not make other changes to the General QM loan definition.
- Temporary GSE QMs: Extends the termination date of new GSE QMs to October 1, 2022, or when the applicable GSE exits federal conservatorship, if that happens earlier. The provision that created this loan category is commonly known as the GSE Patch.
In January 2021, the NCUA issued Regulatory Alert 21-RA-01 informing credit unions of changes the CFPB made to the ATR/QM Rule in December 2020. The April 2021 final rule affects the changes discussed in 21-RA-01. Credit unions should read the provisions of the CFPB’s April 2021 final rule to determine its effects on their operations. The CFPB also provides a compliance guide (opens new window) and other resources (opens new window).
General QM Final Rule Amendment (amends 12 CFR 1026.43)
The December 2020 General QM Final Rule (opens new window) amended Regulation Z by replacing the General QM loan definition of debt-to-income (DTI) limit with a limit based on loan pricing and making other changes to the General QM loan definition. The General QM final rule took effect on March 1, 2021, and it provided a mandatory compliance date of July 1, 2021.
Under the April 2021 final rule, a lender can use either the original underwriting process (with the 43 percent DTI limit) or the new underwriting process (with price-based thresholds) for applications received from March 1, 2021, to September 30, 2022. Lenders must use the revised General QM loan definition for applications received on or after October 1, 2022.
Temporary GSE QM Amendment (amends 12 CFR 1026.43)
Temporary GSE QMs are eligible to be purchased or guaranteed by either the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively, the GSEs), while operating under the conservatorship or receivership of the Federal Housing Finance Agency.
In October 2020, a final rule (opens new window) limited the Temporary GSE QM loan definition to covered transactions for which the lender receives the consumer’s application before the mandatory compliance date of the General QM Final Rule. Therefore, the Temporary GSE QM loan definition now expires upon the earlier of October 1, 2022, or the date the applicable GSE exits federal conservatorship (rather than on the original mandatory compliance date of July 1, 2021, or the date the applicable GSE exits federal conservatorship).
If you have questions about the information in this Regulatory Alert, please contact the NCUA’s Office of Consumer Financial Protection at 703.518.1140 or ComplianceMail@ncua.gov. You can also contact your NCUA regional office.
Todd M. Harper