Qualified Mortgage Definition Under the Truth in Lending Act (Regulation Z): General QM Loan Definition; Delay of Mandatory Compliance Date, 22844-22860 [2021-09028]
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Federal Register / Vol. 86, No. 82 / Friday, April 30, 2021 / Rules and Regulations
calendar year in which the stress test is
performed pursuant to this section, and
that the Board will communicate the asof date and a description of the
component to the company no later than
March 1 of the calendar year in which
the stress test is performed.
Administrative Law
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A. Administrative Procedure Act
The Board is issuing this final rule
without prior notice and the
opportunity for public comment and the
30-day delayed effective date ordinarily
prescribed by the Administrative
Procedure Act (APA).6 Pursuant to
section 553(b)(B) of the APA, general
notice and the opportunity for public
comment are not required with respect
to a rulemaking when an ‘‘agency for
good cause finds (and incorporates the
finding and a brief statement of reasons
therefor in the rules issued) that notice
and public procedure thereon are
impracticable, unnecessary, or contrary
to the public interest.’’ 7
The Board believes that the public
interest is best served by implementing
the final rule as soon as possible. Public
comment is unnecessary, as the SCB
final rule was previously issued for
comment, and the technical edits
discussed here merely correct drafting
errors in the SCB final rule.
The corrections made by this final
rule will reduce ambiguity and ensure
that banking organizations implement
the company-run stress test in a
consistent manner and as described in
the Supplementary Information section
of the SCB final rule and other final
rules adopted by the Board.
The APA also requires a 30-day
delayed effective date, except for (1)
substantive rules which grant or
recognize an exemption or relieve a
restriction; (2) interpretative rules and
statements of policy; or (3) as otherwise
provided by the agency for good cause.8
The Board finds good cause to publish
the final rule correction with an
immediate effective date for the same
reasons set forth above under the
discussion of section 553(b)(B) of the
APA.
B. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3521) (PRA) states that
no agency may conduct or sponsor, nor
is the respondent required to respond
to, an information collection unless it
displays a currently valid OMB control
number. This final rule does not contain
any collections of information, and
65
U.S.C. 553.
U.S.C. 553(b)(B).
8 5 U.S.C. 553(d).
75
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therefore no submissions will be made
by the Board to OMB in connection with
this final rule.
1831w, 1835, 1844(b), 1844(c), 3101 et seq.,
3101 note, 3904, 3906–3909, 4808, 5361,
5362, 5365, 5366, 5367, 5368, 5371.
C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) 9
requires an agency to consider whether
the rules it proposes will have a
significant economic impact on a
substantial number of small entities.10
The RFA applies only to rules for which
an agency publishes a general notice of
proposed rulemaking pursuant to 5
U.S.C. 553(b). As discussed previously,
consistent with section 553(b)(B) of the
APA, the Board has determined for good
cause that general notice and
opportunity for public comment is
unnecessary and contrary to the public’s
interest, and therefore the Board is not
issuing a notice of proposed rulemaking.
Accordingly, the Board has concluded
that the RFA’s requirements relating to
an initial and final regulatory flexibility
analysis do not apply.
Subpart F—Company-Run Stress Test
Requirements for Certain U.S. Bank
Holding Companies and Nonbank
Financial Companies Supervised by
the Board
D. Plain Language
Section 722 of the Gramm-LeachBliley Act 11 requires the Federal
banking agencies to use ‘‘plain
language’’ in all proposed and final
rules published after January 1, 2000. In
light of this requirement, the Board has
sought to present the final rule in a
simple and straightforward manner.
List of Subjects in 12 CFR Part 252
Administrative practice and
procedure, Banks, Banking, Capital
planning, Federal Reserve System,
Holding companies, Reporting and
recordkeeping requirements, Securities,
Stress testing.
2. In § 252.54 by revise paragraph
(b)(2)(i) introductory text to read as
follows:
■
§ 252.54
Stress test.
*
*
*
*
*
(b) * * *
(2) * * *
(i) The Board may require a covered
company with significant trading
activity to include a trading and
counterparty component in its severely
adverse scenario in the stress test
required by this section. The data used
in this component must be as of a date
selected by the Board between October
1 of the previous calendar year and
March 1 of the calendar year in which
the stress test is performed pursuant to
this section, and the Board will
communicate the as-of date and a
description of the component to the
company no later than March 1 of the
calendar year in which the stress test is
performed pursuant to this section. A
covered company has significant trading
activity if it has:
*
*
*
*
*
By order of the Board of Governors of the
Federal Reserve System.
Ann Misback,
Secretary of the Board.
[FR Doc. 2021–09011 Filed 4–29–21; 8:45 am]
BOARD OF GOVERNORS OF THE
FEDERAL RESERVE SYSTEM
BILLING CODE P
12 CFR Chapter II
BUREAU OF CONSUMER FINANCIAL
PROTECTION
Authority and Issuance
For the reasons set forth in the
preamble, chapter II of title 12 of the
Code of Federal Regulations is amended
as follows:
PART 252—ENHANCED PRUDENTIAL
STANDARDS (REGULATION YY)
1. The authority citation for part 252
continues to read as follows:
■
Authority: 12 U.S.C. 321–338a, 481–486,
1467a, 1818, 1828, 1831n, 1831o, 1831p–1,
95
U.S.C. 601 et seq.
regulations issued by the Small Business
Administration, a small entity includes a depository
institution, bank holding company, or savings and
loan holding company with total assets of $600
million or less and trust companies with average
annual receipts of $41.5 million or less. See 13 CFR
121.201.
11 12 U.S.C. 4809.
10 Under
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12 CFR Part 1026
[Docket No. CFPB–2021–0003]
RIN 3170–AA98
Qualified Mortgage Definition Under
the Truth in Lending Act (Regulation
Z): General QM Loan Definition; Delay
of Mandatory Compliance Date
Bureau of Consumer Financial
Protection.
ACTION: Final rule; official
interpretation.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) is issuing
this final rule to delay until October 1,
2022 the mandatory compliance date for
the final rule titled Qualified Mortgage
Definition under the Truth in Lending
SUMMARY:
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Act (Regulation Z): General QM Loan
Definition (General QM Final Rule). The
Bureau is taking this action to help
ensure access to responsible, affordable
mortgage credit and to preserve
flexibility for consumers affected by the
COVID–19 pandemic and its economic
effects.
DATES: Effective date: This final rule is
effective on June 30, 2021.
Compliance date: Compliance with
the final rule published December 29,
2020, at 85 FR 86308, is delayed until
October 1, 2022.
FOR FURTHER INFORMATION CONTACT:
Waeiz Syed, Counsel or Ben Cady,
Senior Counsel, Office of Regulations,
at 202–435–7700. If you require this
document in an alternative electronic
format, please contact CFPB_
Accessibility@cfpb.gov.
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
The Ability-to-Repay/Qualified
Mortgage Rule (ATR/QM Rule) requires
a creditor to make a reasonable, good
faith determination of a consumer’s
ability to repay a residential mortgage
loan according to its terms. Loans that
meet the ATR/QM Rule’s requirements
for qualified mortgages (QMs) obtain
certain protections from liability. The
ATR/QM Rule defines several categories
of QMs.
One QM category defined in the ATR/
QM Rule is the General QM category.
General QMs must comply with the
ATR/QM Rule’s prohibitions on certain
loan features, points-and-fees limits,
and underwriting requirements. Under
the original ATR/QM Rule, the ratio of
the consumer’s total monthly debt to
total monthly income (DTI or DTI ratio)
could not exceed 43 percent for a loan
to meet the General QM loan definition
(original, DTI-based General QM loan
definition).1 In December 2020, the
Bureau issued the General QM Final
Rule, which amended Regulation Z by
replacing the original, DTI-based
General QM loan definition with a limit
based on loan pricing and by making
other changes to the General QM loan
definition (revised, price-based General
QM loan definition).2 The General QM
Final Rule took effect on March 1, 2021,
and it provided a mandatory
compliance date of July 1, 2021. Under
the General QM Final Rule, as issued in
December 2020, for covered transactions
for which creditors receive an
application on or after the March 1,
2021 effective date but prior to the July
1, 2021 mandatory compliance date,
1 12 CFR 1026.43(e)(2)(vi), as was in effect on
February 26, 2021.
2 85 FR 86308 (Dec. 29, 2020).
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creditors had the option of complying
with either the original, DTI-based
General QM loan definition or the
revised, price-based General QM loan
definition. Only the revised, price-based
General QM loan definition would have
been available for applications received
on or after the July 1, 2021 mandatory
compliance date.
On March 3, 2021, the Bureau
released for public comment a proposal
to delay the General QM Final Rule’s
mandatory compliance date from July 1,
2021 to October 1, 2022. After
considering the comments, the Bureau
is issuing this final rule delaying the
General QM Final Rule’s mandatory
compliance date as proposed.
Specifically, this final rule amends
comments 43–2 and 43(e)(4)–2 and –3 to
reflect a delay of the mandatory
compliance date by changing the date
‘‘July 1, 2021’’ where it appears in those
comments to ‘‘October 1, 2022.’’ The
final rule also adds new comment
43(e)(2)–1 to clarify the General QM
loan definitions available to creditors
for applications received on or after
March 1, 2021, but prior to October 1,
2022.
For covered transactions for which
creditors receive an application on or
after March 1, 2021, but prior to October
1, 2022, creditors will have the option
of complying with either the original,
DTI-based General QM loan definition
or the revised, price-based General QM
loan definition. Under the final rule,
only the revised, price-based General
QM loan definition will be available for
applications received on or after the
October 1, 2022 mandatory compliance
date.
The ATR/QM Rule also defines a
temporary category of QMs that is also
affected by this final rule. That
temporary category of QMs includes
mortgages that (1) comply with the same
loan-feature prohibitions and pointsand-fees limits as General QMs and (2)
are eligible to be purchased or
guaranteed by either the Federal
National Mortgage Association (Fannie
Mae) or the Federal Home Loan
Mortgage Corporation (Freddie Mac)
(collectively, the government-sponsored
enterprises or GSEs), while operating
under the conservatorship or
receivership of the Federal Housing
Finance Agency (FHFA). This final rule
refers to these loans as Temporary GSE
QM loans, and the provision that
created this loan category is commonly
known as the GSE Patch. In October
2020, the Bureau issued a final rule
stating that the Temporary GSE QM loan
definition will be available only for
covered transactions for which the
creditor receives the consumer’s
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application before the mandatory
compliance date of the General QM
Final Rule.3 Under the General QM
Final Rule, the Temporary GSE QM loan
definition would have expired on the
earlier of July 1, 2021 or the date the
applicable GSE exits Federal
conservatorship. Under this final rule,
the Temporary GSE QM loan definition
will expire upon the earlier of October
1, 2022, or the date the applicable GSE
exits Federal conservatorship.
As discussed below, this final rule
delays the mandatory compliance date
of the General QM Final Rule to help
ensure access to responsible, affordable
mortgage credit and to preserve
flexibility for consumers affected by the
COVID–19 pandemic and its economic
effects. This final rule does not make
any other changes to the General QM
loan definition. The Bureau plans to
evaluate the General QM Final Rule’s
amendments to the General QM loan
definition and will consider at a later
date whether to initiate another
rulemaking to reconsider other aspects
of the General QM loan definition.
The effective date of this final rule is
June 30, 2021.
II. Background
A. Dodd-Frank Act Amendments to the
Truth in Lending Act and the General
QM Loan Definition
The Dodd-Frank Wall Street Reform
and Consumer Protection Act (DoddFrank Act) 4 amended the Truth in
Lending Act (TILA) 5 to establish,
among other things, ability-to-repay
(ATR) requirements in connection with
the origination of most residential
mortgage loans.6 As amended by the
Dodd-Frank Act, TILA prohibits a
creditor from making a residential
mortgage loan unless the creditor makes
a reasonable and good faith
determination based on verified and
documented information that the
consumer has a reasonable ability to
repay the loan.7 TILA identifies the
factors a creditor must consider in
making a reasonable and good faith
3 85
FR 67938 (Oct. 26, 2020).
L. 111–203, 124 Stat. 1376 (2010).
5 15 U.S.C. 1601 et seq.
6 Dodd-Frank Act sections 1411–12, 1414, 124
Stat. 1376, 2142–49; 15 U.S.C. 1639c.
7 15 U.S.C. 1639c(a)(1). TILA section 103 defines
‘‘residential mortgage loan’’ to mean, with some
exceptions including open-end credit plans, ‘‘any
consumer credit transaction that is secured by a
mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling or on
residential real property that includes a dwelling.’’
15 U.S.C. 1602(dd)(5). TILA section 129C also
exempts certain residential mortgage loans from the
ATR requirements. See, e.g., 15 U.S.C. 1639c(a)(8)
(exempting reverse mortgages and temporary or
bridge loans with a term of 12 months or less).
4 Pub.
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assessment of a consumer’s ability to
repay. These factors are the consumer’s
credit history, current and expected
income, current obligations, DTI ratio or
residual income after paying nonmortgage debt and mortgage-related
obligations, employment status, and
other financial resources other than
equity in the dwelling or real property
that secures repayment of the loan.8
A creditor may not be certain whether
its ATR determination is reasonable in
a particular case. TILA addresses this
potential uncertainty by defining a
category of loans—called QMs—for
which a creditor ‘‘may presume that the
loan has met’’ the ATR requirements.9
The statute generally defines a QM to
mean any residential mortgage loan for
which:
• The loan does not have negative
amortization, interest-only payments, or
balloon payments;
• The loan term does not exceed 30
years;
• The total points and fees generally
do not exceed 3 percent of the loan
amount;
• The income and assets relied upon
for repayment are verified and
documented;
• The underwriting uses a monthly
payment based on the maximum rate
during the first five years, uses a
payment schedule that fully amortizes
the loan over the loan term, and takes
into account all mortgage-related
obligations; and
• The loan complies with any
guidelines or regulations established by
the Bureau relating to the ratio of total
monthly debt to monthly income or
alternative measures of ability to pay
regular expenses after payment of total
monthly debt.10
In January 2013, the Bureau issued a
final rule amending Regulation Z to
implement TILA’s ATR requirements
and define several categories of QM
loans (January 2013 Final Rule).11 This
final rule refers to the January 2013
Final Rule and later amendments 12 to it
collectively as the ATR/QM Rule or the
Rule. One category of QMs defined by
the ATR/QM Rule consists of General
QMs. The January 2013 Final Rule
8 15
U.S.C. 1639c(a)(3).
U.S.C. 1639c(b)(1).
10 15 U.S.C. 1639c(b)(2)(A).
11 78 FR 6408 (Jan. 30, 2013).
12 As discussed in part II.C below, the Bureau
made several amendments to the ATR/QM Rule in
2020. Prior to 2020, the Bureau made several other
amendments to the ATR/QM Rule. See 78 FR 35429
(June 12, 2013); 78 FR 44686 (July 24, 2013); 78 FR
60382 (Oct. 1, 2013); 79 FR 65300 (Nov. 3, 2014);
80 FR 59944 (Oct. 2, 2015); 81 FR 16074 (Mar. 25,
2016); 85 FR 67938 (Oct. 26, 2020).
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provided that a loan was a General QM
if:
• The loan does not have negativeamortization, interest-only, or balloonpayment features, a term that exceeds 30
years, or points and fees that exceed
specified limits; 13
• The creditor underwrites the loan
based on a fully amortizing schedule
using the maximum rate permitted
during the first five years; 14
• The creditor considers and verifies
the consumer’s income and debt
obligations in accordance with
appendix Q; 15 and
• The consumer’s DTI ratio is no
more than 43 percent, determined in
accordance with appendix Q.16
Appendix Q contained standards for
calculating and verifying debt and
income for purposes of determining
whether a mortgage satisfies the 43
percent debt-to-income ratio limit (DTI
limit) for General QMs. The standards in
appendix Q were adapted from
guidelines maintained by the Federal
Housing Administration (FHA) when
the January 2013 Final Rule was
issued.17
As discussed above, another category
of QMs defined by the January 2013
Final Rule, Temporary GSE QMs,
consists of mortgages that (1) comply
with the ATR/QM Rule’s prohibitions
on certain loan features and its
limitations on points and fees 18 and (2)
are eligible to be purchased or
guaranteed by either GSE while under
the conservatorship of FHFA.19 Unlike
for General QMs, the January 2013 Final
Rule did not prescribe a DTI limit for
Temporary GSE QMs nor did it require
use of appendix Q to verify and
calculate debt, income, and DTI ratios.
The January 2013 Final Rule provided
that the Temporary GSE QM loan
definition would expire with respect to
each GSE when that GSE ceases to
operate under conservatorship or on
January 10, 2021, whichever occurred
first.20
In 2020, the Bureau issued three final
rules amending the ATR/QM Rule, two
13 12
CFR 1026.43(e)(2)(i) through (iii).
CFR 1026.43(e)(2)(iv).
15 12 CFR 1026.43(e)(2)(v), as was in effect on
February 26, 2021.
16 12 CFR 1026.43(e)(2)(vi), as was in effect on
February 26, 2021.
17 78 FR 6408, 6527–28 (Jan. 30, 2013) (noting
that appendix Q incorporates, with certain
modifications, the definitions and standards in
HUD Handbook 4155.1, Mortgage Credit Analysis
for Mortgage Insurance on One-to-Four-Unit
Mortgage Loans).
18 12 CFR 1026.43(e)(2)(i) through (iii).
19 12 CFR 1026.43(e)(4), as was in effect on
February 26, 2021.
20 12 CFR 1026.43(e)(4)(ii)(A) and
1026.43(e)(4)(iii)(B), as was in effect on February
26, 2021.
14 12
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of which relate to this final rule.21 These
two final rules are discussed below.
1. The Patch Extension Final Rule
The Bureau issued the Patch
Extension Final Rule on October 20,
2020. It was published in the Federal
Register on October 26, 2020.22 The
Patch Extension Final Rule amended
Regulation Z to replace the January 10,
2021 sunset date of the Temporary GSE
QM loan definition with a provision
stating that the Temporary GSE QM loan
definition will be available only for
covered transactions for which the
creditor receives the consumer’s
application before the mandatory
compliance date of final amendments to
the General QM loan definition in
Regulation Z. The Patch Extension Final
Rule did not amend the clause
providing that the Temporary GSE QM
loan definition expires on the date the
applicable GSE exits Federal
conservatorship. Therefore, under the
Patch Extension Final Rule, the
Temporary GSE QM loan definition will
expire on the mandatory compliance
date of final amendments to the General
QM loan definition or the date the
applicable GSE exits Federal
conservatorship, whichever comes first.
2. The General QM Final Rule
The Bureau issued the General QM
Final Rule on December 10, 2020. It was
published in the Federal Register on
December 29, 2020.23 The General QM
Final Rule amended Regulation Z to
remove the General QM loan
definition’s DTI limit (and appendix Q)
and replace it with limits based on the
loan’s pricing. Under the amended rule,
a loan meets the General QM loan
definition only if the annual percentage
rate (APR) exceeds the average prime
offer rate (APOR) for a comparable
transaction by less than 2.25 percentage
points as of the date the interest rate is
set. The General QM Final Rule
provided higher thresholds for loans
with smaller loan amounts, for certain
manufactured housing loans, and for
subordinate-lien transactions. The
General QM Final Rule requires the
creditor to consider the consumer’s DTI
ratio or residual income and to consider
and verify the consumer’s income or
assets other than the value of the
dwelling and the consumer’s debts. The
General QM Final Rule also provides a
safe harbor for compliance with this
verification requirement if a creditor
complies with verification standards in
21 The third rule amending the ATR/QM Rule that
the Bureau issued in 2020 was the Seasoned QM
Final Rule. See 85 FR 86402 (Dec. 29, 2020).
22 85 FR 67938 (Oct. 26, 2020).
23 85 FR 86308 (Dec. 29, 2020).
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certain manuals listed in the rule.24 The
General QM Final Rule had an effective
date of March 1, 2021, and a mandatory
compliance date of July 1, 2021.
B. February 2021 Statement Regarding
General QM and Seasoned QM Final
Rules
On February 23, 2021, the Bureau
issued a statement titled ‘‘Statement on
Mandatory Compliance Date of General
QM Final Rule and Possible
Reconsideration of General QM Final
Rule and Seasoned QM Final Rule’’
(February 23, 2021 Statement or
Statement).25 The Statement was
published in the Federal Register on
February 26, 2021.26 In it, the Bureau
stated, in relevant part, that it expected
to issue a proposal to delay the July 1,
2021 mandatory compliance date of the
General QM Final Rule. The Bureau
stated that it would consider at a later
date whether to initiate another
rulemaking to reconsider other aspects
of the General QM loan definition. The
Statement also indicated that the Bureau
is considering whether to initiate a
rulemaking to revisit another final rule
that it issued in December 2020, the
Seasoned QM Final Rule.27
C. The General QM Mandatory
Compliance Date Delay Proposal
On March 3, 2021, the Bureau
released a proposal to delay the General
QM Final Rule’s mandatory compliance
date from July 1, 2021 to October 1,
2022 (the proposal). The proposal was
published in the Federal Register on
March 5, 2021.28 In the proposal, the
Bureau preliminarily concluded that
delaying the mandatory compliance
date to October 1, 2022 would help
ensure access to responsible, affordable
mortgage credit and preserve flexibility
for consumers affected by the COVID–19
pandemic and its economic effects. The
comment period for the proposal ended
on April 5, 2021. The Bureau received
24 unique comments on the proposal.
The Bureau summarizes and responds
to these comments in part IV below.
D. The Effects of the COVID–19
Pandemic on the Mortgage Markets
As discussed above and in the
proposal, the Bureau is delaying the
General QM Final Rule’s mandatory
24 See
comment 43(e)(2)(v)(B)–3.i.
of Consumer Fin. Prot., Statement on
Mandatory Compliance Date of General QM Final
Rule and Possible Reconsideration of General QM
Final Rule and Seasoned QM Final Rule (Feb. 23,
2021), https://www.consumerfinance.gov/
documents/9505/cfpb_qm-statement_2021-02.pdf.
26 86 FR 11623 (Feb. 26, 2021).
27 85 FR 86402 (Dec. 29, 2020).
28 86 FR 12839 (Mar. 5, 2021).
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25 Bureau
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compliance date to help those affected
by the COVID–19 pandemic and its
economic effects. The General QM Final
Rule acknowledged that the COVID–19
pandemic has had a significant effect on
the U.S. economy. In the early months
of the pandemic, economic activity
contracted, millions of workers became
unemployed, and mortgage markets
were affected. Although the
unemployment rate has declined from a
high of 14.8 percent in April 2020 to 6.0
percent in March 2021,29
unemployment remains elevated
relative to the pre-pandemic rate of 3.5
percent in February 2020, and the labor
force participation rate remains below
pre-pandemic levels, at 61.5 percent in
March 2021 versus 63.3 percent in
February 2020. The housing market has
seen a significant rebound in mortgageorigination activity, buoyed by
historically low interest rates and by an
increasingly large share of GSE-backed
loans. However, the share of origination
activity outside the GSE-backed
origination channel has declined from
pre-pandemic levels, and mortgagecredit availability for many
consumers—including those who would
be dependent on the non-QM market for
financing—remains tighter than prior to
the pandemic.30 The pandemic’s impact
on both the secondary market for new
originations and on the servicing of
existing mortgages is described below.
1. Secondary Market Impacts and
Implications for Mortgage Origination
Markets
The early economic disruptions
associated with the COVID–19
pandemic restricted the flow of credit in
the U.S. economy, particularly as
uncertainty rose in mid-March 2020,
and investors moved rapidly towards
cash and government securities.31 The
lack of investor demand to purchase
mortgages, combined with a large
supply of agency mortgage-backed
29 News Release, Bureau of Labor Statistics, U.S.
Dep’t of Labor, USDL–21–0582, The Employment
Situation (Apr. 2, 2021), https://www.bls.gov/
charts/employment-situation/civilianunemployment-rate.htm, and https://www.bls.gov/
charts/employment-situation/civilian-labor-forceparticipation-rate.htm (charts related to the Apr. 2,
2021 The Employment Situation news release).
30 Brandon Ivey, Expanded-Credit Originations
See Recovery in 4Q20, Inside Mortg. Fin. (Mar. 12,
2021), https://www.insidemortgagefinance.com/
articles/220770-expanded-credit-mortgageoriginations-slowly-recovering-from-shock.
31 The Coronavirus Aid, Relief, and Economic
Security Act, CARES Act: Hearing on The Quarterly
CARES Act Report to Congress Before the S. Comm.
on Banking, Hous., & Urban Affairs, 116th Cong. 2–
3 (2020) (statement of Jerome H. Powell, Chairman,
Bd. of Governors of the Fed. Reserve Sys.), https://
www.banking.senate.gov/imo/media/doc/Powell
%20Testimony%205-19-20.pdf (CARES Act
Hearing).
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22847
securities (MBS) entering the market,32
resulted in widening spreads between
the rates on a 10-year Treasury note and
mortgage interest rates.33 This dynamic
made it difficult for creditors to
originate loans, as many creditors rely
on the ability to profitably sell loans in
the secondary market to generate the
liquidity to originate new loans. This
resulted in mortgages becoming more
expensive for both homebuyers and
homeowners looking to refinance. After
the actions taken by the Board of
Governors of the Federal Reserve
System (Board) in March 2020 to
purchase agency MBS ‘‘in the amounts
needed to support smooth market
functioning and effective transmission
of monetary policy to broader financial
conditions and the economy,’’ 34 market
conditions improved substantially.35
This helped to stabilize the MBS market
and resulted in a decline in mortgage
rates and a significant increase in
refinance activity since the Board’s
intervention.
Because non-agency MBS 36 are
generally perceived by investors as
riskier than agency MBS, the market for
non-agency and non-QM mortgage
credit significantly contracted in the
early months of the pandemic. Issuance
of non-agency MBS declined by 8.2
percent in the first quarter of 2020, with
nearly all the transactions completed in
January and February before the
COVID–19 pandemic began to affect the
economy significantly.37 Nearly all
major non-QM creditors ceased making
loans in March and April 2020. The
non-QM market has since been
recovering, with strong investor demand
for non-QM MBS due to better-thanexpected performance during the
pandemic.38 Many non-QM creditors—
32 Agency MBS are backed by loans guaranteed by
Fannie Mae, Freddie Mac, and the Government
National Mortgage Association (Ginnie Mae).
33 Laurie Goodman et al., Urban Inst., Housing
Finance at a Glance, Monthly Chartbook (Mar. 26,
2020), https://www.urban.org/sites/default/files/
publication/101926/housing-finance-at-a-glance-amonthly-chartbook-march-2020.pdf (Housing
Finance at a Glance) (on file).
34 Press Release, Bd. of Governors of the Fed.
Reserve Sys., Federal Reserve announces extensive
new measures to support the economy (Mar. 23,
2020), https://www.federalreserve.gov/newsevents/
pressreleases/monetary20200323b.htm.
35 CARES Act Hearing, supra note 30, at 3.
36 Non-agency MBS are not backed by loans
guaranteed by Fannie Mae, Freddie Mac, or Ginnie
Mae. This includes securities collateralized by nonQM loans.
37 Brandon Ivey, Non-Agency MBS Issuance
Slowed in First Quarter, Inside Mortg. Fin. (Apr. 3,
2020), https://www.insidemortgagefinance.com/
articles/217623-non-agency-mbs-issuance-slowedin-first-quarter (on file).
38 Bandon Ivey, Non-QM MBS Issuers Ready. But
Where Are the Loans?, Inside Mortg. Fin. (Jan. 29,
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which largely depend on the ability to
sell loans in the secondary market in
order to fund new loans—have resumed
originations, although some continue to
maintain tighter underwriting
requirements compared to prior to the
pandemic.39 Other creditors that have
typically specialized in non-QM
financing have shifted their focus to
GSE originations due to historically low
interest rates and the relative speed and
ease with which GSE loans can be
originated. Nonetheless, many non-QM
creditors and investors expect the nonagency market to continue to strengthen
in 2021 and recover to its pre-pandemic
levels of production.40 Because many of
these loans that were historically
considered non-QM may qualify for QM
status under the revised, price-based
General QM loan definition, it is unclear
how quickly the market for non-QM
loans that fall outside of existing QM
definitions will develop.
As illustrated in Figure 1, the GSEs
continue to play a dominant role in the
market recovery, with the GSE share of
first-lien mortgage originations at 59
percent in 2020, up from 43 percent in
2019. One analysis found that the FHA
and U.S. Department of Veterans Affairs
(VA) share declined slightly to 18
percent from 19 percent a year prior.41
Portfolio lending declined to 21 percent
in 2020, down from 36 percent in the
third quarter of 2019, and private label
securitizations declined to 1 percent
from 2 percent a year prior.
Figure 1
First Lien Origination Composition
120%
100%
80%
60%
40%
9%
20%
-
0% -2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
■ GSE securitization
,,, FHA/VA securitlzation
■ PIS seruritization
•• Portfolio
Sources: Urban Institute analysis oflnside Mortgage Finance data (used with permission
2. Servicing Market Impacts and
Implications for Origination Markets
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In addition to the direct impact on
origination volume and composition,
the pandemic’s impact on the mortgage
servicing market has downstream effects
on mortgage originations, as many of the
same entities both originate and service
mortgages. Anticipating that a number
of homeowners would struggle to pay
2021), https://www.insidemortgagefinance.com/
articles/220373-non-qm-originations-and-mbsready-to-rebound-after-the-refi-boom (on file).
39 Brandon Ivey, Expanded-Credit Lending Inches
Up in Third Quarter, Inside Mortg. Fin. (Nov. 25,
2020), https://www.insidemortgagefinance.com/
articles/219861-expanded-credit-lending-ticks-upin-3q-amid-slow-recovery (on file).
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their mortgages due to the pandemic
and related economic impacts, Congress
passed and the President signed into
law the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act) 42
in March 2020. The CARES Act
provides certain protections for
borrowers with federally backed
mortgages, such as those whose
mortgages are purchased or securitized
by a GSE or insured or guaranteed by
the FHA, VA, or U.S. Department of
Agriculture (USDA). The CARES Act
mandated a 60-day foreclosure
moratorium for such mortgages and
allowed borrowers to request up to 180
days of forbearance due to a COVID–19related financial hardship, with an
option to extend the forbearance period
for an additional 180 days.
40 Brandon Ivey, Outlook on Non-Agency MBS
Issuance: Bright and Gloomy, Inside Mortg. Fin.
(Jan. 15, 2021), https://
www.insidemortgagefinance.com/articles/220261mixed-views-on-the-outlook-for-non-agency-mbsissuance-in-2021 (on file).
41 Laurie Goodman et al., Urban Inst., Housing
Finance at a Glance, Monthly Chartbook (Feb.
2021), https://www.urban.org/sites/default/files/
publication/103746/housing-finance-at-a-glance-amonthly-chartbook-february-2021_0.pdf (Housing
Finance at a Glance).
42 Public Law 116–136, 134 Stat. 281 (2020).
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from Urban Institute)
22849
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Servicers also remain obligated to make
escrowed real estate tax and insurance
payments to local taxing authorities and
insurance companies. While servicers
are required to hold liquid reserves to
cover anticipated advances, early in the
pandemic there were significant
concerns that higher-than-expected
forbearance rates over an extended
period of time could lead to liquidity
shortages, particularly among many
non-bank servicers. While forbearance
rates remain elevated at 4.66 percent for
the week ending April 4, 2021, they
have decreased since reaching their high
of 8.55 percent on June 7, 2020, as
illustrated in Figure 2 below.45
from the previous expiration date of
March 31, 2021, and the GSEs
announced a similar extension on
February 25, 2021.43 The government
agencies also announced an extension
in the forbearance enrollment window
until June 30, 2021, to provide
additional time for borrowers to request
a COVID–19 forbearance. FHFA has not
yet announced a deadline for borrowers
with mortgages backed by the GSEs to
enroll in a COVID–19 forbearance plan.
Following the passage of the CARES
Act, some mortgage servicers remain
obligated to make some principal and
interest payments to investors in GSE
and Ginnie Mae securities, even if
consumers are not making payments.44
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Because many mortgage servicers also
originate the loans they service, many
creditors, as well as several warehouse
providers,46 initially responded to the
risk of elevated forbearances and higherthan-expected monthly advances by
imposing credit overlays—i.e.,
additional underwriting standards—for
new originations. These new
underwriting standards included more
stringent requirements for non-QM,
jumbo, and government loans.47 An
43 Press Release, The White House, Fact Sheet:
Biden Administration Announces Extension of
COVID–19 Forbearance and Foreclosure Protections
for Homeowners (Feb. 16, 2021), https://
www.whitehouse.gov/briefing-room/statementsreleases/2021/02/16/fact-sheet-bidenadministration-announces-extension-of-covid-19forbearance-and-foreclosure-protections-forhomeowners/. See also Press Release, Fed. Hous.
Fin. Agency, FHFA Extends COVID–19 Forbearance
Period and Foreclosure and REO Eviction
Moratoriums (Feb. 25, 2021), https://www.fhfa.gov/
Media/PublicAffairs/Pages/FHFA-Extends-COVID19-Forbearance-Period-and-Foreclosure-and-REOEviction-Moratoriums.aspx.
44 The GSEs typically repurchase loans out of the
trust after they fall 120 days delinquent, after which
the servicer is no longer required to advance
principal and interest, but Ginnie Mae requires
servicers to advance principal and interest until the
default is resolved. On April 21, 2020, FHFA
confirmed that servicers of GSE loans will only be
required to advance four months of mortgage
payments, regardless of whether the GSEs
repurchase the loans from the trust after 120 days
of delinquency. Fed. Hous. Fin. Agency, FHFA
Addresses Servicer Liquidity Concerns, Announces
Four Month Advance Obligation Limit for Loans in
Forbearance (Apr. 21, 2020), https://www.fhfa.gov/
Media/PublicAffairs/Pages/FHFA-AddressesServicer-Liquidity-Concerns-Announces-Four-
Month-Advance-Obligation-Limit-for-Loans-inForbearance.aspx.
45 Press Release, Mortg. Bankers Ass’n, Share of
Mortgage Loans in Forbearance Decreases to 4.66%
(April 12, 2021), https://www.mba.org/2021-pressreleases/april/share-of-mortgage-loans-inforbearance-decreases-to-466-percent.
46 Warehouse providers are creditors that provide
financing to mortgage originators and servicers to
fund and service loans.
47 Maria Volkova, FHA/VA Lenders Raise Credit
Score Requirements, Inside Mortg. Fin. (Apr. 3,
2020), https://www.insidemortgagefinance.com/
articles/217636-fhava-lenders-raise-fico-creditscore-requirements (on file).
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16:13 Apr 29, 2021
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FHFA recently announced that
borrowers with a mortgage backed by
the GSEs may be eligible for two
additional three-month forbearance
extensions, for a total of up to 18
months of forbearance, for certain
borrowers who began a COVID–19
forbearance on or before February 28,
2021. On February 16, 2021, FHA, VA,
and USDA also provided up to six
months of additional mortgage
forbearance, in three-month increments,
for borrowers who entered forbearance
on or before June 30, 2020. FHA, VA,
and USDA also extended the foreclosure
moratorium on government-insured and
guaranteed loans until June 30, 2021,
22850
Federal Register / Vol. 86, No. 82 / Friday, April 30, 2021 / Rules and Regulations
‘‘adverse market fee’’ of 50 basis points
on most refinances became effective for
new originations delivered to the GSEs
on or after December 1, 2020, to cover
projected losses due to forbearances, the
foreclosure moratoria, and other default
servicing expenses.48 However, due to
refinance origination profits resulting
from historically low interest rates, the
leveling off in forbearance rates, and
actions taken at the Federal level to
alleviate servicer liquidity pressure,49
concerns over non-bank liquidity and
related credit overlays have eased,
although Federal regulators continue to
monitor the situation.50 Nonetheless,
access to credit for higher-risk but
creditworthy consumers remains an
ongoing concern given continued
uncertainty over the impact of the
expiration of foreclosure moratoria and
COVID–19 forbearance plans on the
mortgage market as well as creditor
capacity constraints due to strong
refinance demand.51
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III. Legal Authority
The Bureau is issuing this final rule
to amend Regulation Z pursuant to its
authority under TILA and the DoddFrank Act. Section 1061 of the DoddFrank Act transferred to the Bureau the
‘‘consumer financial protection
48 Press Release, Fed. Hous. Fin. Agency, Adverse
Market Refinance Fee Implementation now
December 1 (Aug. 25, 2020), https://www.fhfa.gov/
Media/PublicAffairs/Pages/Adverse-MarketRefinance-Fee-Implementation-Now-December1.aspx.
49 On April 10, 2020, Ginnie Mae released
guidance on a Pass-Through Assistance Program
whereby Ginnie Mae will provide financial
assistance at a fixed interest rate to servicers facing
a principal and interest shortfall as a last resort.
Ginnie Mae, All Participant Memorandum (APM)
20–03: Availability of Pass-Through Assistance
Program for Participants in Ginnie Mae’s SingleFamily MBS Program (Apr. 10, 2020), https://
www.ginniemae.gov/issuers/program_guidelines/
Pages/mbsguideapmslibdisppage.aspx?
ParamID=105. On April 7, 2020, Ginnie Mae also
announced approval of a servicing advance
financing facility, whereby mortgage servicing
rights are securitized and sold to private investors.
Press Release, Ginnie Mae, Ginnie Mae approves
private market servicer liquidity facility (Apr. 7,
2020), https://www.ginniemae.gov/newsroom/
Pages/PressReleaseDispPage.aspx?ParamID=194.
50 Fin. Stability Oversight Council, U.S. Dep’t of
the Treasury, 2020 Annual Report, at 169 (2020),
https://home.treasury.gov/system/files/261/
FSOC2020AnnualReport.pdf.
51 Nat’l Mortg. News, Opinion: The originations
feast and credit famine (Oct. 4, 2020), https://
www.nationalmortgagenews.com/opinion/theoriginations-feast-and-credit-availability-famine (on
file). This final rule is separate from the Bureau’s
pending proposal to amend certain provisions of
Regulation X to assist borrowers affected by the
COVID–19 pandemic, which was published in the
Federal Register on April 9, 2021. Because the
purpose of this final rule complements the purpose
of the Bureau’s pending proposal, the Bureau
believes that it is appropriate to finalize this rule
regardless of how it proceeds with the its pending
proposal.
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functions’’ previously vested in certain
other Federal agencies, including the
Board. The Dodd-Frank Act defines the
term ‘‘consumer financial protection
function’’ to include ‘‘all authority to
prescribe rules or issue orders or
guidelines pursuant to any Federal
consumer financial law, including
performing appropriate functions to
promulgate and review such rules,
orders, and guidelines.’’ 52 Title X of the
Dodd-Frank Act (including section
1061), along with TILA and certain
subtitles and provisions of title XIV of
the Dodd-Frank Act, are Federal
consumer financial laws.53
A. TILA
TILA section 105(a). Section 105(a) of
TILA directs the Bureau to prescribe
regulations to carry out the purposes of
TILA and states that such regulations
may contain such additional
requirements, classifications,
differentiations, or other provisions and
may further provide for such
adjustments and exceptions for all or
any class of transactions that the Bureau
judges are necessary or proper to
effectuate the purposes of TILA, to
prevent circumvention or evasion
thereof, or to facilitate compliance
therewith.54 A purpose of TILA is ‘‘to
assure a meaningful disclosure of credit
terms so that the consumer will be able
to compare more readily the various
credit terms available to him and avoid
the uninformed use of credit.’’ 55
Additionally, a purpose of TILA
sections 129B and 129C is to assure that
consumers are offered and receive
residential mortgage loans on terms that
reasonably reflect their ability to repay
the loans and that are understandable
and not unfair, deceptive, or abusive.56
The Bureau is issuing this final rule
pursuant to its rulemaking, adjustment,
and exception authority under TILA
section 105(a).
TILA section 129C(b)(2)(A). TILA
section 129C(b)(2)(A)(vi) provides the
Bureau with authority to establish
guidelines or regulations relating to
ratios of total monthly debt to monthly
income or alternative measures of
ability to pay regular expenses after
payment of total monthly debt, taking
into account the income levels of the
52 12
U.S.C. 5581(a)(1)(A).
Act section 1002(14), 12 U.S.C.
5481(14) (defining ‘‘Federal consumer financial
law’’ to include the ‘‘enumerated consumer laws’’
and the provisions of title X of the Dodd-Frank Act),
Dodd-Frank Act section 1002(12)(O), 12 U.S.C.
5481(12)(O) (defining ‘‘enumerated consumer laws’’
to include TILA).
54 15 U.S.C. 1604(a).
55 15 U.S.C. 1601(a).
56 15 U.S.C. 1639b(a)(2).
53 Dodd-Frank
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borrower and such other factors as the
Bureau may determine relevant and
consistent with the purposes described
in TILA section 129C(b)(3)(B)(i).57 The
Bureau is issuing this final rule
pursuant to its authority under TILA
section 129C(b)(2)(A)(vi).
TILA section 129C(b)(3)(A), (B)(i).
TILA section 129C(b)(3)(B)(i) authorizes
the Bureau to prescribe regulations that
revise, add to, or subtract from the
criteria that define a QM upon a finding
that such regulations are necessary or
proper to ensure that responsible,
affordable mortgage credit remains
available to consumers in a manner
consistent with the purposes of TILA
section 129C; or are necessary and
appropriate to effectuate the purposes of
TILA sections 129B and 129C, to
prevent circumvention or evasion
thereof, or to facilitate compliance with
such sections.58 In addition, TILA
section 129C(b)(3)(A) directs the Bureau
to prescribe regulations to carry out the
purposes of section 129C.59 The Bureau
is issuing this final rule pursuant to its
authority under TILA section
129C(b)(3)(B)(i).
B. Dodd-Frank Act
Dodd-Frank Act section 1022(b).
Section 1022(b)(1) of the Dodd-Frank
Act authorizes the Bureau to prescribe
rules to enable the Bureau to administer
and carry out the purposes and
objectives of the Federal consumer
financial laws, and to prevent evasions
thereof.60 TILA and title X of the DoddFrank Act are Federal consumer
financial laws. Accordingly, the Bureau
is exercising its authority under DoddFrank Act section 1022(b) to prescribe
rules that carry out the purposes and
objectives of TILA and title X and
prevent evasion of those laws.
IV. Section-by-Section Analysis
1026.43 Minimum Standards for
Transactions Secured by a Dwelling
The General QM Final Rule
established a March 1, 2021 effective
date and a July 1, 2021 mandatory
compliance date. Comment 43–2
explains that, for transactions for which
a creditor received the consumer’s
application on or after March 1, 2021,
but prior to July 1, 2021, creditors
seeking to originate General QMs have
the option of complying with either the
revised, price-based General QM loan
definition or the original, DTI-based
General QM loan definition. This
comment also explains that, for
57 15
U.S.C. 1639c(b)(2)(A).
U.S.C. 1639c(b)(3)(B)(i).
59 15 U.S.C. 1639c(b)(3)(A).
60 12 U.S.C. 5512(b)(1).
58 15
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Federal Register / Vol. 86, No. 82 / Friday, April 30, 2021 / Rules and Regulations
transactions for which a creditor
received the consumer’s application on
or after July 1, 2021, creditors seeking to
originate General QMs must use the
revised, price-based General QM loan
definition.
Additionally, under the Patch
Extension Final Rule, the Temporary
GSE QM loan definition expires upon
the earlier of the General QM Final
Rule’s mandatory compliance date or
the date the applicable GSE ceases to
operate under conservatorship.
Therefore, under the mandatory
compliance date established by the
General QM Final Rule, creditors
seeking to originate QMs had the
additional option of complying with the
Temporary GSE QM loan definition, but
only if the application for the covered
transaction was received before either
July 1, 2021, or the date the applicable
GSE ceased to operate under
conservatorship, whichever came first.
This final rule delays the General QM
Final Rule’s mandatory compliance date
from July 1, 2021 to October 1, 2022, as
the Bureau proposed. Specifically, the
final rule amends comments 43–2 and
43(e)(4)–2 and –3 to reflect a delay of
the mandatory compliance date by
changing the date ‘‘July 1, 2021’’ where
it appears in those comments to
‘‘October 1, 2022.’’ The Bureau is also
adding comment 43(e)(2)–1 to clarify
that both the original, DTI-based
General QM loan definition and the
revised, price-based General QM loan
definition are available to creditors for
transactions for which a creditor
received an application on or after
March 1, 2021, but prior to October 1,
2022. The specific amendments to the
commentary are the same as the
amendments the Bureau proposed. The
Bureau is also correcting a
typographical error in comment
43(e)(4)–2 by replacing ‘‘thorough’’ with
‘‘through.’’
With these changes, creditors seeking
to originate General QMs will have the
option of complying with either the
revised, price-based General QM loan
definition or the original, DTI-based
General QM loan definition for
transactions for which a creditor
received the consumer’s application on
or after March 1, 2021, but prior to
October 1, 2022. For transactions for
which a creditor received the
consumer’s application on or after
October 1, 2022, creditors seeking to
originate General QMs will have to use
the revised, price-based General QM
loan definition. Additionally—because
the Temporary GSE QM loan definition
expires on the mandatory compliance
date of the General QM Final Rule or the
date the applicable GSE ceases to
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operate under conservatorship,
whichever comes first—creditors
seeking to originate QMs will have the
additional option of complying with the
Temporary GSE QM loan definition, if
the application for the covered
transaction was received before either
October 1, 2022, or the date the
applicable GSE ceases to operate under
conservatorship, whichever comes first.
The Bureau recognizes that the practical
availability of the Temporary GSE QM
loan definition may be affected by
policies or agreements created by parties
other than the Bureau, such as the
Preferred Stock Purchase Agreements
(PSPAs), which include restrictions on
GSE purchases that rely on the
Temporary GSE QM loan definition
after July 1, 2021.61
Reasons for Delaying the Mandatory
Compliance Date to October 1, 2022
The Bureau is issuing this final rule
because it has concluded that
maintaining the July 1, 2021 mandatory
compliance date may leave some
struggling homeowners with fewer
options by reducing the flexibility of
creditors to respond to the effects of the
pandemic. In the Patch Extension Final
Rule and the General QM Final Rule,
the Bureau noted the disruptive effects
of the pandemic on the mortgage market
but nevertheless concluded that these
effects did not justify the adoption of a
mandatory compliance date later than
July 1, 2021. Upon further evaluation,
the Bureau has concluded that it may
not have given sufficient weight to the
potential risk that mandating the
transition to the price-based approach in
the revised General QM loan definition
on July 1, 2021 could restrict options for
consumers struggling with the
disruptive effects of the pandemic. The
Bureau has concluded that preserving
flexibility to respond to the effects of the
pandemic, by delaying the mandatory
compliance date until October 1, 2022,
outweighs concerns that a delay of the
mandatory compliance date could stifle
the development of private-sector
approaches to underwriting or a
rebound of the non-GSE private market
in the near term.
The Bureau also concludes that the
adverse impact of the pandemic on
61 On January 14, 2021, the U.S. Department of
the Treasury and FHFA amended the terms of the
PSPAs for Fannie Mae and Freddie Mac. Section
5.14(c) was added to the agreement and limits the
GSEs’ acquisition of certain loans on or after July
1, 2021, including loans that are not qualified
mortgages as defined by 12 CFR 1026.43(e)(2), (5),
(6), (7) or (f) with certain exceptions. See Letter of
Treasury Secretary Steven T. Mnuchin to FHFA
Director Mark Calabria (Jan. 14, 2021), https://
home.treasury.gov/system/files/136/ExecutedLetter-Agreement-for-Fannie-Mae.pdf.
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22851
mortgage markets may persist longer
than anticipated at the time of
publication of the General QM Final
Rule. In particular, as discussed in more
detail below, with the extension of
certain forbearance programs and
foreclosure moratoria, the Bureau has
concluded that the potential for
disruption in the mortgage market will
persist well past July 2021.
The Bureau notes that this rulemaking
does not reconsider the revised, pricebased General QM loan definition that
was adopted in the General QM Final
Rule. This definition went into effect on
March 1, 2021, and creditors have the
option of using it to originate QMs.
Rather, this final rule concludes that it
would be appropriate in light of the
continuing disruptive effects of the
pandemic to help facilitate greater
creditor flexibility and expanded
availability of responsible, affordable
credit options for some struggling
consumers by also providing QM status
to loans originated under the original,
DTI-based General QM loan definition
and, potentially, under the Temporary
GSE QM loan definition until October 1,
2022.
The Bureau is issuing this final rule
due to concerns that requiring creditors
seeking to make QM loans to shift to the
revised, price-based General QM loan
definition could reduce access to credit,
particularly for certain consumer
segments. As discussed in detail in part
IV of the proposal, the Bureau has two
concerns related to access to
responsible, affordable mortgage credit.
First, as discussed in the proposal, the
Bureau believes that ongoing regulatory
interventions to assist consumers who
may have suffered an income disruption
related to the pandemic—such as
COVID–19 forbearance plans and
foreclosure moratoria—and potential
disruptions in the market when those
interventions expire warrant a delay of
the mandatory compliance date.62 The
Bureau is concerned that the impact of
the eventual expiration of foreclosure
moratoria and COVID–19 forbearance
plans described in part II.D above has
the potential to lead to additional
disruptions in the mortgage markets.
The Bureau has concluded that it may
not have given sufficient weight to these
issues in mandating that creditors
comply with the price-based approach
on July 1, 2021. In addition, the Bureau
has concluded that the extension of
certain forbearance programs and
foreclosure moratoria may result in
these effects continuing longer than the
Bureau anticipated at the time of the
General QM Final Rule, and the Bureau
62 86
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concludes that delaying the mandatory
compliance date of the General QM
Final Rule to October 1, 2022 will
provide additional flexibility to
creditors originating QM loans.
Second, as discussed in the proposal,
the Bureau has concerns about mortgage
credit availability for some creditworthy
consumers who would qualify for a
mortgage but for the disruptive market
effects of the pandemic, and believes
that such concerns warrant a delay of
the mandatory compliance date.63 The
Bureau seeks to avoid a reduction in
credit access for certain consumers who
have been unable to purchase or
refinance due to the effects of the
pandemic on the origination market. As
described in the proposal, the Bureau is
concerned that, despite the record
origination volumes, access to low
interest-rate refinances and purchase
mortgages in these unique
circumstances may be less widely
available for consumers with weaker
credit relative to consumers with
stronger credit in part due to creditor
capacity constraints as opposed to the
standard risk-based pricing adjustments
that creditors typically charge. The
Bureau is finalizing this proposal
because it is concerned that requiring
creditors to transition to the revised,
price-based General QM loan definition
on July 1, 2021—and eliminating the
Temporary GSE QM loan definition and
the original, DTI-based General QM loan
definition at that time—will exacerbate
these credit-access concerns.
For the reasons described above, the
Bureau is finalizing the proposed
revisions to the commentary. The
mandatory compliance date for the
General QM Final Rule is October 1,
2022. For covered transactions for
which creditors receive an application
on or after the March 1, 2021 effective
date and before the October 1, 2022
mandatory compliance date, creditors
have the option of complying with
either the revised, price-based General
QM loan definition or the original, DTIbased General QM loan definition.
Additionally—because the Temporary
GSE QM loan definition expires on the
mandatory compliance date of the
General QM Final Rule or the date the
applicable GSE ceases to operate under
conservatorship, whichever comes
first—creditors seeking to originate QMs
will have the additional option of
complying with the Temporary GSE QM
loan definition, if the application for the
covered transaction was received before
either October 1, 2022 or the date the
applicable GSE ceases to operate under
conservatorship, whichever comes
63 Id.
at 12850–53.
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first.64 This final rule will be effective
on June 30, 2021.
Comments and Responses
The Bureau received 24 unique
comments on the proposal. The Bureau
summarizes and responds to these
comments below.
Comments on the Bureau’s reasons
for delaying the compliance date. The
Bureau received many comments on the
reasons that it described in the proposal
for delaying the mandatory compliance
date, which are related to the impact of
the COVID–19 pandemic on the
mortgage market. Commenters varied in
their views as to whether delaying the
mandatory compliance date would have
the desired effect of mitigating the
pandemic-related disruptions identified
in the proposal.
Nearly all commenters agreed with
the Bureau’s concerns that pandemicrelated disruptions have significantly
impacted the mortgage market, and
several commenters agreed that delaying
the mandatory compliance date to
October 1, 2022 would help ensure
access to responsible, affordable
mortgage credit and preserve flexibility
for consumers affected by the COVID–19
pandemic and its economic effects, as
the Bureau stated in the proposal. One
industry commenter stated that the
proposed delay of the mandatory
compliance date would prove especially
helpful to small institutions such as
community banks in providing access to
credit, as they may not be ready to
comply with the revised, price-based
General QM loan definition by July 1,
2021. This commenter also stated that
the Temporary GSE QM loan definition,
in particular, has played an important
role in providing access to credit for
minority, younger, millennial, non-W–2,
and low-income consumers. Another
industry commenter suggested that the
Bureau delay the mandatory compliance
date for as long as possible. The
commenter recommended that, if the
Bureau delays the mandatory
compliance date to October 1, 2022, the
Bureau set up a future review to ensure
the sufficiency of that date.
Another industry commenter stated
that the additional flexibility afforded to
credit unions by a delay of the
mandatory compliance date will assist
consumers who may not have otherwise
been able to obtain a mortgage under the
revised, price-based General QM loan
64 As noted above, however, the availability of the
Temporary GSE QM loan definition may be affected
by policies or agreements created by parties other
than the Bureau, such as the PSPAs, which include
restrictions on GSE purchases that rely on the
Temporary GSE loan QM definition after July 1,
2021. See supra note 61 and accompanying text.
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definition due to the current lending
environment and impacts of the
pandemic. This commenter stated that it
agreed with the Bureau that delaying the
mandatory compliance date would
disincentivize the mispricing of loans
for higher-risk borrowers that the
comment stated is occurring as a result
of pandemic-related market conditions,
such as the high volume of mortgage
originations as the proposal discussed.
A coalition of consumer advocates
stated that delaying the mandatory
compliance date would give creditors
the flexibility to provide credit and
allow servicers to focus on assisting
consumers with post-forbearance
options. The commenter stated that,
with relatively high unemployment
rates and 2.5 million consumers in
active forbearance plans, the industry
and the Bureau should remain focused
on resolving forbearance plans to
minimize unnecessary foreclosures. The
commenters added that, given the
resources necessary to move these
borrowers into a post-forbearance
accommodation, allowing the continued
use of multiple QM definitions will
mitigate the extent to which disruptions
in the servicing market affect the
origination market. An industry
commenter stated that servicers are
currently focused on assisting the
unprecedented number of borrowers
exiting forbearance, noting that the
reperformance of loans currently in
forbearance is of critical importance to
overall market stability. This commenter
also stated that the current economic
conditions do not create an environment
conducive to the implementation of
major regulatory changes. These
commenters and another industry
commenter stated generally that the
flexibility afforded to creditors by
keeping multiple QM definitions
available is warranted given the
uncertain trajectory of the United States’
economic recovery from the pandemic.
One industry commenter stated that
recent market trends related to the
pandemic necessitate additional time
for implementation beyond the time that
is typically needed. Specifically, the
commenter stated that the early-2021
increase in mortgage interest rates may
cause a decline in profits as creditors
are required to simultaneously
implement many post-forbearance loss
mitigation and resolution requirements
as forbearance plans come to an end.
This commenter also stated that the
GSEs are preparing to implement new
capital standards that are estimated to
increase mortgage rates and that the
Bureau should study the impact on
pricing, consumers, and the market as
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well as allow creditors time to adapt to
the multiple challenges presented.
Many commenters opposed the
Bureau’s proposal to delay the
mandatory compliance date and stated
that the proposed delay would not
result in the credit-access benefits cited
by the Bureau. Several industry
commenters stated that loans that obtain
QM status through the revised, pricebased General QM loan definition
overlap significantly with loans that
obtained QM status through the
Temporary GSE QM loan definition and
the original, DTI-based General QM loan
definition. They stated that, as a result,
the impact on access to credit of
delaying the mandatory compliance
date would be minimal at best. While
these commenters acknowledged the
economic stress the pandemic has
placed on the industry and on
consumers, they argued that the Bureau
has not identified a sufficient basis to
conclude that delaying the mandatory
compliance date would mitigate these
disruptions. These commenters asserted
that the proposal did not provide data
or analysis demonstrating the need for
the Temporary GSE QM loan definition
and the original, DTI-based General QM
loan definition for an extended period
of time, given the expansive nature of
the revised, price-based General QM
loan definition. These commenters also
stated that recent purchase restrictions
in the PSPAs for Fannie Mae and
Freddie Mac will limit the effects of a
delay of the mandatory compliance
date, as discussed further below. A
coalition comprised primarily of
consumer advocates stated that despite
their belief that extending the
Temporary GSE QM loan definition
through an extension of the mandatory
compliance date is not necessary, they
also believe that such an extension will
do no harm.
Several industry commenters asserted
that the Bureau failed to identify a clear
nexus between the consumers who
would be affected by the pandemic and
those who could specifically benefit
from the original, DTI-based General
QM loan definition. One commenter
stated that few loans with DTI ratios
below 43 percent would be priced with
an interest rate spread more than 2.25
percentage points above APOR. This
commenter also stated that the burden
of complying with appendix Q can have
an adverse impact on access to credit.
This commenter also stated that
borrowers most likely to have been
impacted by the pandemic include
those who suffered an income
disruption or increased debt loads, and
that the Bureau had not explained how
those particular borrowers are likely to
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benefit from the original, DTI-based
General QM loan definition, which
requires substantial income
documentation.
While no commenters disputed that
the pandemic has disrupted the
mortgage industry, some commenters
disagreed with the Bureau’s
explanations of how delaying the
mandatory compliance date would
address the two types of market
problems it identified in the proposal.
With regard to the first issue identified
in the proposal—the upcoming
expiration of forbearance plans and
foreclosure moratoria—one industry
commenter stated that the GSEs and
government agencies are offering
streamlined post-forbearance loss
mitigation options that should assist
families in keeping their homes and that
high levels of home equity should make
it possible for many consumers who
seek to sell their homes to do so, which
would mitigate the need for a delay in
the mandatory compliance date.
Another industry commenter stated that
delaying the mandatory compliance
date is unlikely to materially increase
access to credit and also noted that the
supply of available homes falls far short
of purchaser demand, and therefore they
expect no shortage of qualified
borrowers.
With regard to the second issue
identified in the proposal relating to
access to credit—the availability of
mortgage credit for some creditworthy
consumers who would qualify for a
mortgage but for the disruptive market
effects of the pandemic—one
commenter acknowledged the
supporting data the Bureau put forward
in the proposal but noted the proposal
lacked quantitative data specifically
related to creditor capacity constraints
and credit overlays. This commenter
reiterated that even if these capacity
constraints and overlays are
substantiated, the Bureau has not
provided evidence that a delay of the
mandatory compliance date would
mitigate these identified concerns. A
separate industry commenter stated that
industry-wide adoption of the revised,
price-based General QM loan definition
may actually make the market more
efficient, alleviating some of the
pandemic-related capacity constraints
that some creditors are facing and that
the Bureau identified in the proposed
rule. This commenter asserted that the
revised, price-based General QM loan
definition should provide ample access
to credit for creditworthy consumers
during the pandemic recovery.
Many industry and consumer
advocate commenters addressed the
impact of recent amendments to the
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PSPAs on the proposed rationale for
delaying the mandatory compliance
date. Commenters stated that these
amendments may prevent the GSEs
from purchasing loans based on the
Temporary GSE QM loan definition
after July 1, 2021, and therefore may
significantly limit the impact of the
mandatory compliance date delay,
absent revisions to the agreements.65
Many industry and consumer
advocate commenters that supported
delaying the mandatory compliance
date suggested that the Bureau also
advocate for a change to the PSPAs that
would allow for the purchase of
Temporary GSE QM loans during the
proposed delay of the mandatory
compliance date. They stated that loans
originated under the Temporary GSE
QM loan definition are crucial to
maintaining market stability and access
to credit for certain segments of the
market, such as minorities and low- to
moderate-income consumers. One
industry commenter suggested that
credit unions, in particular, rely on the
Temporary GSE QM loan definition to
lend in their communities and stated
that their internal industry survey data
suggest that 61 percent of their
outstanding mortgages qualified to be
sold to the GSEs and that 19 percent of
survey respondents indicated that the
expiration of the Temporary GSE QM
loan definition would have a material
impact on their credit union.66
Several industry commenters that
opposed delaying the mandatory
compliance date stated that certain ways
in which the Bureau stated the delay
would address market disruptions, such
as by providing the GSEs with the
flexibility to tailor programs to meet
challenges specific to the COVID–19
pandemic, may be thwarted by
restrictions on Temporary GSE QM
loans in the PSPAs. Moreover, they
stated that the existing language in the
PSPAs would not constrict access to
credit, as most loans covered by the
Temporary GSE QM loan definition
would also be covered by the revised,
price-based General QM loan definition.
One industry commenter also argued
that a delay in the mandatory
compliance date would not provide
additional implementation time
because, in light of the PSPAs, creditors
65 On January 14, 2021, the U.S. Department of
the Treasury and FHFA amended the terms of the
PSPAs for Fannie Mae and Freddie Mac. Section
5.14(c) was added to the agreement and limits the
GSEs’ acquisition of certain loans on or after July
1, 2021, including loans that are not qualified
mortgages as defined by 12 CFR 1026.43(e)(2), (5),
(6), (7) or (f) with certain exceptions.
66 The comment did not provide a copy of or
citation to the survey described.
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would likely need to comply with the
revised, price-based General QM loan
definition in order to sell their loans to
the GSEs as of July 1, 2021.
A few industry commenters noted
that additional provisions were
included in the PSPAs that restrict
access to credit such as certain
limitations on the purchases of second
homes, investor properties, and higherrisk single-family loans. Specifically,
these commenters cited the PSPA
limitation on the acquisitions of loans
with two out of three high-risk
characteristics, defined as a loan-tovalue ratio (LTV) of 90 percent or
greater, a DTI of 45 percent or greater,
and a credit score of 680 or less. These
commenters were concerned that such
limitations would impair access to
credit and noted that a quick
implementation of the revised, pricebased General QM loan definition may
mitigate some of these impacts.
Response. The Bureau is finalizing the
proposed rule to delay the mandatory
compliance date until October 1, 2022
because it has concluded that delaying
the mandatory compliance date until
that date will help ensure access to
responsible, affordable mortgage credit
and will help preserve flexibility for
consumers affected by the COVID–19
pandemic and its economic effects.
While the Bureau acknowledges that
future access-to-credit impacts of this
delay are subject to uncertainty,
providing additional options to
originate loans with multiple pathways
to QM status will increase flexibility for
creditors and secondary market
participants to serve emerging market
needs and will help increase access to
mortgage credit for consumers during a
period of significant economic stress.
With respect to the commenter
recommendation to set up a future
review of the delayed mandatory
compliance date, the Bureau will
continue to monitor for any
unanticipated effects of the COVID–19
pandemic on market conditions to
determine if future changes are
warranted.
The Bureau has concluded that
delaying the mandatory compliance
date will expand access to credit and
allow industry participants to focus on
offering struggling consumers postforbearance options. No commenters
disputed the disruptive impact of the
pandemic on the mortgage industry. In
the proposed rule, the Bureau focused
its analysis on the impact of expanded
access to credit on facilitating interest
rate-reducing refinances as well as
allowing creditworthy purchasers to
absorb some of the distressed properties
that may enter the market due to the
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inability of the seller to maintain a postforbearance payment. But as noted
above, several industry and consumer
advocate commenters stated that
allowing creditors more time to
implement the revised, price-based
General QM loan definition will allow
servicers to focus their efforts on
keeping struggling consumers in their
homes, which will likely reduce the
number of distressed properties that
enter the market. The Bureau
determines that this rationale provided
by commenters is an additional,
although not necessary, reason to delay
the mandatory compliance date to
October 1, 2022. The Bureau has
concluded that, given the significant
uncertainty in the mortgage market with
regard to the effects of forbearance plans
and foreclosure moratoria expiring,
delaying the mandatory compliance
date will provide both servicers and
creditors with the flexibility to use
multiple QM definitions and reallocate
resources between origination and
servicing departments to best assist
consumers. The Bureau believes this
may reduce some operational capacity
constraints in the servicing market,
although the Bureau expects servicer
operational capacity constraints to
continue at least through the end of this
year.
The Bureau further concludes that the
pandemic has had the effect of
restricting access to credit for higherrisk, yet creditworthy consumers and
that delaying the mandatory compliance
date may ease these credit-access
concerns by providing multiple
pathways to QM status. The Bureau
notes that, with the exception of one
industry commenter,67 commenters did
not question the Bureau’s findings that
access to credit has been constrained for
higher-risk, yet creditworthy borrowers
due to creditor capacity limitations and
creditor precautions intended to ensure
that new originations are less likely to
request a COVID–19 forbearance in the
future. Several industry commenters
agreed with the proposal’s analysis of
this issue. The Bureau acknowledges
that, given the continually evolving
nature of both the pandemic’s impact on
the mortgage market and responses by
regulators, there is uncertainty as to the
extent to which delaying the mandatory
compliance date will increase access to
credit. However, the Bureau concludes
that, to some extent, the additional
flexibility provided by this final rule
will increase—rather than decrease—
access to credit.
Moreover, the Bureau is concerned
that temporarily, non-agency market
constraints created by the pandemic
could make it more difficult for some
creditworthy borrowers with the ability
to repay mortgage loans that currently
qualify for QM status under the original,
DTI-based General QM loan definition
to obtain such loans if those loans no
longer qualify for QM status based on
the revised, price-based General QM
loan definition. For example, as
discussed in the section 1022(b)
analysis in part V, of the 33,000
additional consumers expected to obtain
conventional QM loans priced 2.25
percentage points or higher above APOR
due to this rule, 28,000 are expected to
obtain QM status through the original,
DTI-based General QM loan definition.
The Bureau estimates that the continued
availability of the original, DTI-based
General QM loan definition and,
potentially, the Temporary GSE QM
loan definition each separately provide
beneficial access to credit under this
final rule. As a result, even if the PSPAs
continue to restrict GSE purchases that
rely on the Temporary GSE loan QM
definition after July 1, 2021, as some
commenters noted, the Bureau
concludes that the final rule will
increase access to mortgage credit
relative to the current rule under which
the original, DTI-based General QM loan
definition would no longer be available
starting July 1, 2021. The benefits from
leaving the Temporary GSE QM loan
definition in place until October 1, 2022
and the benefits from creditors using the
original, DTI-based General QM loan
definition during that period are, in the
Bureau’s view, each independently
sufficient reasons for delaying the
mandatory compliance date.
As the proposal stated, while the
Bureau acknowledges that policies,
agreements, or legislation created by
parties other than the Bureau—
including the PSPAs—may limit the
impact of the mandatory compliance
date delay, the Bureau is unable to
predict how such agreements or
restrictions might change in the future.
The Bureau also notes that sections
5.14(c)(iii)–(vi) of the letter agreements
amending the PSPAs appear to provide
FHFA with the authority to allow the
GSEs to purchase certain loans that do
not comply with the QM definitions
listed in section 5.14(c)(i).68 These
include loans secured by investment
67 This industry commenter did not challenge the
Bureau’s findings that access to credit has been
restricted for higher-risk consumers, but asserted
that the Bureau did not provide quantitative data
in support of creditor capacity constraints.
68 Section 5.14(c)(i) limits GSE loan purchases
after July 1, 2021 to loans that satisfy the General
QM loan definition, Small Creditor QM loan
definition, Seasoned QM loan definition, or Balloon
Payment QM loan definition.
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properties, high-LTV streamlined
refinances, and single family loans
secured by manufactured housing. The
letter agreements also appear to provide
broad authority for FHFA and the GSEs
to establish temporary underwriting
flexibilities during times of exigent
circumstances. While the agreement
appears to provide FHFA discretion to
determine whether it will allow the
GSEs to exercise these additional
purchase flexibilities, issuing this final
rule to delay the mandatory compliance
date will confer QM status to these
loans if FHFA decides it is necessary to
exercise this authority. QM status may
prove valuable in the future given the
uncertain market outlook as a result of
the COVID–19 pandemic. Absent this
final rule, if FHFA and the GSEs
exercised this authority, it would permit
the GSEs to purchase certain non-QM
loans. The Temporary GSE QM loan
definition confers QM status on loans
eligible for sale to the GSEs. Therefore,
finalizing this rule will allow FHFA to
exercise this authority for the GSEs and
other secondary market participants to
instead purchase these loans with QM
status, which may increase access to
credit through lower pricing and greater
secondary market liquidity.
Comments on uncertainty about the
General QM loan definition. Several
industry commenters stated that the
proposal has created uncertainty with
respect to whether the Bureau will
permit the revised, price-based General
QM loan definition to remain in effect.
For example, several industry
commenters stated that the Bureau’s
primary purpose in delaying the
mandatory compliance date is to
facilitate reconsideration of the General
QM loan definition. Several commenters
stated that the Bureau’s February 23,
2021 Statement 69 has contributed to
this uncertainty.
Commenters also stated that this
uncertainty may deter creditors and
vendors from continuing to invest in the
resources and training necessary to
implement the revised, price-based
General QM loan definition. One
commenter stated that this uncertainty
will likely result in market participants
experiencing compliance challenges
that may divert resources away from
other needs, in particular from
responding to borrower requests for
assistance due to hardships experienced
under the COVID–19 pandemic, until
there is assurance that the Bureau will
permit the revised, price-based General
QM loan definition to remain in effect.
Industry commenters also asserted that
delays in implementing the price-based
69 See
supra part II.B.
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approach could negatively affect access
to credit; for example, they suggested
that it could inhibit innovative
underwriting approaches that, in the
view of these commenters, would
benefit minority borrowers in particular.
Response. The Bureau understands
that some industry uncertainty has
resulted from the Bureau’s Statement
providing transparency about its plans
to consider at a later date whether to
reconsider other aspects of the General
QM Final Rule, as well as from the
Bureau’s reiteration in the proposal of
the applicable language from the
Statement. However, this final rule
concerns the delay of the mandatory
compliance date from July 1, 2021 to
October 1, 2022. Commenters did not
explain why delaying the mandatory
compliance date to October 1, 2022, in
and of itself, would meaningfully
increase uncertainty in the market about
whether the Bureau will reconsider
other aspects of the General QM Final
Rule, and the Bureau does not believe
that delaying the mandatory compliance
date to October 1, 2022 would have this
effect.
The Bureau also notes that, while
many industry commenters stated that
uncertainty about potential
reconsideration of the revised, pricebased General QM loan definition will
deter creditors from implementing the
revised General QM loan definition (and
therefore mitigate benefits from that
final rule), commenters did not identify
examples of this occurring in the
market. In contrast, the Bureau
understands that several larger creditors
have already implemented the revised,
priced-based General QM loan
definition and announced new products
that are underwritten in accordance
with the revised definition that went
into effect on March 1, 2021.70 Even if
uncertainty results in some creditors
choosing to delay implementation of the
revised, price-based General QM loan
definition, and even if that result could
be attributed to the rule, the Bureau
concludes that such delays are unlikely
to result in significant limitations on
access to responsible, affordable
mortgage credit under the price-based
approach and do not outweigh the
potential credit-access benefits of
delaying the mandatory compliance
date.
Comments on general implementation
issues. Several industry commenters
stated that they supported the Bureau’s
70 See, e.g., Brandon Ivey, Some Non-Agency
Lenders Embracing New QM Rule, Inside Mortg.
Fin. (Mar. 26, 2021), https://
www.insidemortgagefinance.com/articles/220914some-non-agency-lenders-embracing-cfpbs-qmchanges.
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proposal to delay the mandatory
compliance date because the delay
would give them more time to prepare
to comply with the revised, pricedbased General QM loan definition. In
contrast, one industry commenter stated
that delaying the mandatory compliance
date would disrupt market participants’
efforts to bring their systems into
compliance with the price-based
approach and cause market participants
to incur additional compliance-related
costs for training, Loan Origination
System adjustments, secondary market
integrations, and amendments to
policies and procedures. Other industry
commenters stated that delaying the
mandatory compliance date was not
necessary because many creditors have
already implemented the price-based
approach and several others have made
preparations to implement it by the
original mandatory compliance date of
July 1, 2021. One commenter stated that
creditors and vendors have slowed or
paused implementation efforts in
anticipation of the Bureau’s decision to
delay the mandatory compliance date
and urged the Bureau to issue a final
rule to restore certainty to the market
and allow all market participants time
to adapt. One industry commenter
requested that the Bureau clarify
whether creditors may use either the
original, DTI-based General QM loan
definition or the revised, price-based
General QM loan definition on a loanby-loan basis prior to the mandatory
compliance date, or whether they must
use one definition or the other for all
their loans.
Response. Regarding the comment
that delaying the mandatory compliance
date would disrupt market participants’
efforts to bring their systems into
compliance with the price-based
approach and impose additional
compliance-related costs, the Bureau
notes that, with or without this final
rule, creditors that wish to originate
General QM loans must implement the
revised, price-based General QM loan
definition before October 1, 2022 and
thus face the same compliance
requirements. In addition, the Bureau
reiterates that the purpose of this final
rule is to preserve flexibility by allowing
creditors to continue to use the original,
DTI-based General QM loan definition
and the Temporary GSE QM loan
definition until October 1, 2022.
Accordingly, creditors that wish to use
the revised, price-based General QM
loan definition exclusively by July 1,
2021, as was originally required under
the General QM Final Rule, may still do
so and avoid any additional
compliance-related costs associated
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with the flexibility provided by this
final rule. As many commenters noted,
delaying the compliance date will
simply provide market participants with
more time to bring their systems into
compliance with the revised, pricebased General QM loan definition.
With respect to the comment stating
that delaying the mandatory compliance
date is not necessary because many
creditors have already implemented the
revised, price-based General QM loan
definition and several others are
prepared to implement it by the original
mandatory compliance date, the Bureau
notes that these creditors will not be
harmed by delaying the mandatory
compliance date. Moreover, as
discussed above under ‘‘Comments on
the Bureau’s Reasons for Delaying the
Mandatory Compliance Date,’’ some
commenters have reported that creditors
have experienced challenges
implementing the revised, price-based
General QM loan definition because of
resource constraints due to the recent
forebearance plan and foreclosure
moratoria extensions and the need to
find sustainable post-forebearance
alternatives to keep consumers in their
homes. As noted above, the Bureau
concludes that these challenges
identified by these commenters provide
an additional, although not necessary,
reason for delaying the mandatory
compliance date.
Regarding the comment asking the
Bureau to clarify that the original, DTIbased General QM loan definition and
the revised, priced-based General QM
loan definition are available on a loanby-loan basis, the Bureau notes that, as
new comment 43(e)(2)–1 states, both the
original, DTI-based General QM loan
definition and the revised, price-based
General QM loan definition are
available to creditors for transactions for
which the creditor receives an
application on or after March 1, 2021,
but prior to October 1, 2022.
Finally, the Bureau received many
comments about the merits of the
General QM loan definition and the
Seasoned QM loan definition. The
purpose of this rulemaking is not to
address the merits of the General QM
loan definition or the Seasoned QM loan
definition. These comments are
therefore outside the scope of this
rulemaking. As the Bureau stated in the
Statement and states in this final rule,
the Bureau will consider at a later date
whether to initiate a rulemaking to
revisit others aspects of the General QM
loan definition and the Seasoned QM
loan definition.
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V. Dodd-Frank Act Section 1022(b)
Analysis
A. Overview
As discussed above, this final rule
will delay the mandatory compliance
date of the General QM loan definition
from July 1, 2021 to October 1, 2022. In
developing this final rule, the Bureau
has considered the potential benefits,
costs, and impacts as required by
section 1022(b)(2)(A) of the Dodd-Frank
Act. Specifically, section 1022(b)(2)(A)
of the Dodd-Frank Act calls for the
Bureau to consider the potential benefits
and costs of a regulation to consumers
and covered persons, including the
potential reduction of access by
consumers to consumer financial
products or services, the impact on
depository institutions and credit
unions with $10 billion or less in total
assets as described in section 1026 of
the Dodd-Frank Act, and the impact on
consumers in rural areas. The Bureau
consulted with the prudential regulators
and other appropriate Federal agencies
regarding the consistency of the final
rule with prudential, market, or
systemic objectives administered by
such agencies as required by section
1022(b)(2)(B) of the Dodd-Frank Act.
B. Data and Evidence
The discussion in this impact analysis
relies on data from a range of sources.
These include data collected or
developed by the Bureau, including
HMDA 71 data, as well as other publicly
available sources. In particular, as
indicated in the proposal, the data and
evidence published in the Bureau’s
General QM Final Rule inform this
analysis. Also as indicated in the
proposal, the Bureau conducted an
assessment of the ATR/QM Rule and
published its ATR/QM Rule Assessment
Report as required under section
1022(d) of the Dodd-Frank Act.72 The
Assessment Report provides
quantitative and qualitative information
on questions relevant to the final rule,
including the effect of QM status
relative to non-QM status on access to
71 HMDA requires many financial institutions to
maintain, report, and publicly disclose loan-level
information about mortgages. These data help show
whether creditors are serving the housing needs of
their communities; they give public officials
information that helps them make decisions and
policies; and they shed light on lending patterns
that could be discriminatory. HMDA was originally
enacted by Congress in 1975 and is implemented
by Regulation C. See Bureau of Consumer Fin. Prot.,
Mortgage Data (HMDA), https://
www.consumerfinance.gov/data-research/hmda/.
72 Bureau of Consumer Fin. Prot., Ability to Repay
and Qualified Mortgage Assessment Report (Jan.
2019), https://files.consumerfinance.gov/f/
documents/cfpb_ability-to-repay-qualifiedmortgage_assessment-report.pdf.
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credit. Consultations with other
regulatory agencies, industry, and
research organizations inform the
Bureau’s impact analyses.
The data the Bureau relied upon
provide detailed information on the
number, characteristics, pricing, and
performance of mortgage loans
originated in recent years. While these
data allow the Bureau to estimate the
number of mortgage loans historically
that would have satisfied the different
QM definitions applicable under the
baseline or the final rule, the Bureau
cannot estimate with precision how
consumers may respond to changes in
the QM definitions by obtaining
alternative loan products or how
creditors may respond by changing loan
pricing or product offerings.
The Bureau received several
comments on the proposal’s impact
analysis. Two industry commenters
stated that the Bureau provided
insufficient explanation or support for
its estimate that 33,000 additional
consumers would obtain high-priced
conventional QM loans due to the rule.
As stated in the proposal’s impact
analysis, the Bureau relied on HMDA
data and the evidence published in the
Bureau’s General QM Final Rule for its
analysis. The Benefits to Consumers
section of the proposal stated that
between July 1, 2021 and October 1,
2022, approximately 33,000 additional
consumers would obtain conventional
QM loans priced 2.25 percentage points
or higher above APOR under the final
rule due to the availability of the
original, DTI-based General QM loan
definition and the Temporary GSE QM
loan definition.
In addition, an industry commenter
stated that the Bureau’s 1022(b) analysis
did not account for the effect of the GSE
PSPAs when estimating the impacts of
the rule. The proposal’s impact analysis
included a footnote estimating that if
the GSEs do not purchase loans above
the General QM Final Rule’s pricing
thresholds during the duration of the
mandatory compliance date delay,
approximately 28,000 additional
consumers would obtain conventional
QM loans priced 2.25 percentage points
or higher above APOR under the
proposal.73 This estimate reflects
possible impacts of the rule if the GSE
PSPAs prevent the GSEs from
purchasing loans above the pricing
thresholds established in the General
QM Final Rule.
Regarding potential compliance costs,
as noted above, a trade association
commented that delaying the mandatory
compliance date would disrupt market
73 86
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participants’ efforts to bring their
systems into compliance with the
General QM Final Rule and cause
market participants to incur additional
compliance-related costs. However, as
noted above, with or without this final
rule, creditors that wish to originate
General QM loans must implement the
revised, price-based General QM loan
definition before October 1, 2022 and
thus face the same compliance
requirements. The final rule benefits
creditors by providing additional time
to implement these requirements.
As discussed above, many industry
commenters stated that uncertainty
about potential reconsideration of the
revised, price-based General QM loan
definition will deter creditors from
implementing the revised General QM
loan definition (and therefore mitigate
benefits from that final rule). However,
commenters did not identify examples
of this occurring in the market, which
tends to reduce the credibility of this
concern. Moreover, as discussed above,
the Bureau understands that several
larger creditors have already
implemented the revised, priced-based
General QM loan definition and
announced new products that are
underwritten in accordance with the
revised definition.74 And as already
noted, the Bureau does not believe this
final rule delaying the mandatory
compliance date will meaningfully
increase uncertainty in the market. Even
if uncertainty results in some creditors
choosing to delay implementation of the
revised, price-based General QM loan
definition, and even if that result could
be attributed to the rule, the Bureau is
not aware of any reason to believe that
the effect would be large enough to
result in significant limitations on
access to responsible, affordable
mortgage credit.
Finally, several industry, trade
association, and consumer group
commenters requested that the Bureau
expand public access to the National
Mortgage Database for market
monitoring and research purposes. The
Bureau acknowledges these comments
but considers them to be outside the
scope of this final rule.
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C. Description of the Baseline
The Bureau considers the benefits,
costs, and impacts of the final rule
against the baseline in which the Bureau
takes no action and compliance with the
74 The Bureau does recognize that some creditors
have experienced implementation challenges, as
discussed above, from resource constraints due to
the recent forebearance plan and foreclosure
moratoria extensions and the need to find
sustainable post-forebearance alternatives to keep
consumers in their homes.
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revised General QM loan definition
becomes mandatory on July 1, 2021,
when the Temporary GSE QM loan
definition and the original, DTI-based
General QM loan definition expire and
can no longer be used by creditors to
obtain QM status on new mortgage
loans. Under the final rule, the
Temporary GSE QM loan definition and
the original, DTI-based General QM loan
definition can continue to be used until
October 1, 2022, the new mandatory
compliance date of the revised General
QM loan definition. As a result, the final
rule’s direct market impacts will occur
only during the period between July 1,
2021 and October 1, 2022. The impact
analyses assume the GSEs will remain
in conservatorship for the duration of
this period, and, therefore, that the
conservatorship condition in the
Temporary GSE QM loan definition will
not trigger its expiration.
Under the baseline, when the
Temporary GSE QM loan definition and
the original, DTI-based General QM loan
definition expire on July 1, 2021,
conventional loans could only receive
QM status under the Bureau’s rules by
underwriting according to the revised
General QM requirements, Small
Creditor QM requirements, Balloon
Payment QM requirements, the
expanded portfolio QM amendments
created by the 2018 Economic Growth,
Regulatory Relief, and Consumer
Protection Act,75 or the Seasoned QM
definition.76 The revised General QM
loan definition, which will be the only
type of QM available at origination to all
creditors following the mandatory
compliance date, generally requires
loans to be priced less than 2.25
percentage points above APOR.77
The Bureau anticipates that when the
mandatory compliance date is reached,
the main loans affected will be those
priced 2.25 percentage points or higher
above APOR that are either
75 Public
Law 115–174, 132 Stat. 1296 (2018).
than the mandatory compliance date
delay implemented by this final rule, the Bureau’s
analysis assumes an otherwise identical market and
policy environment under both the baseline and the
final rule. As such, estimates under both the
baseline and final rule assume the same effects of
any separate policy proposals, including the
Bureau’s pending proposal to amend certain
provisions of Regulation X to assist borrowers
affected by the COVID–19 pandemic, which was
published in the Federal Register on April 9, 2021.
The Bureau notes in this respect that it expects any
interactions of the pending proposal and this final
rule to be both difficult to quantify and very limited
relative to the direct effects of this final rule.
77 The comparable thresholds are 6.5 percentage
points over APOR for loans priced under $66,156,
3.5 percentage points over APOR for loans priced
under $110,260 but at or above $66,156, and 6.5
percentage points over APOR for loans for
manufactured housing priced under $110,260. 12
CFR 1026.43(e)(2)(vi)(A) through (D).
76 Other
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conventional loans with DTI ratios at or
below 43 percent (Under-43-Percent-DTI
conventional loans) or GSE-eligible
loans. Retaining the July 1, 2021
mandatory compliance date would have
affected these loans because they are
currently originated as QM loans due to
either the original, DTI-based General
QM loan definition or the Temporary
GSE QM loan definition but, absent
changes in pricing, could not be
originated as QM loans and may not be
originated at all after the mandatory
compliance date.
The Bureau’s analysis of the market
under the baseline focuses on loans
priced 2.25 percentage points or higher
above APOR that are either Under-43Percent-DTI conventional loans or GSEeligible loans because the Bureau
estimates most loans newly obtaining
QM status due to the final rule fall
within those categories. A smaller
number of GSE-eligible loans will not
fall within the revised General QM loan
definition because they do not satisfy
the consider and verify requirements in
the revised General QM loan definition.
The Bureau lacks the loan-level
documentation and underwriting data
necessary to estimate with precision the
number of GSE-eligible loans that do not
satisfy the consider and verify
requirements in the revised General QM
loan definition. These loans are largely
restricted to certain streamlined
refinance loans offered by the GSEs, and
the Bureau estimates that in the current
market such loans are considerably less
numerous than Under-43-Percent-DTI
conventional loans and GSE-eligible
loans priced 2.25 percentage points or
higher above APOR.78 However,
demand for such loans could increase if
housing market conditions deteriorate.
D. Benefits and Costs to Covered
Persons and Consumers
1. Benefits to Consumers
The primary benefit to consumers of
the final rule is the availability of
conventional QM loans priced 2.25
percentage points or higher above
APOR—including both Under-43Percent-DTI conventional loans and
GSE-eligible loans—during the period
from July 1, 2021 to October 1, 2022.
The Bureau uses HMDA data to estimate
the number of loans that would not have
been QM under the baseline, but would
have been QM under the final rule due
to their eligibility for either the original,
78 As of Q4 2020, only 140 loans had been
originated through the GSEs’ High-LTV Refinance
Option since the inception of the program. See
FHFA Foreclosure Prevention and Refinance Report
(Q4 2020), https://www.fhfa.gov/AboutUs/Reports/
ReportDocuments/4Q2020FPR.pdf.
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DTI-based General QM loan definition
or the Temporary GSE QM loan
definition.79 Relative to the baseline, the
Bureau estimates that between July 1,
2021 and October 1, 2022,
approximately 33,000 additional
consumers will obtain conventional QM
loans priced 2.25 percentage points or
higher above APOR under the final rule
due to the availability of the original,
DTI-based General QM loan definition
and the Temporary GSE QM loan
definition.80 While many of these
consumers may have obtained
mortgages of some kind under the
baseline, the largest benefits to
consumers accrue to the consumers who
will obtain a conventional QM loan
under the final rule but would not have
obtained a mortgage under the baseline.
Under the baseline, some of these
33,000 consumers may have been able
to obtain General QM loans priced
below 2.25 percentage points over
APOR due to creditor responses to the
revised General QM loan definition or
obtained QM loans under the Small
Creditor QM definition. Others may
instead have obtained FHA loans, likely
paying higher total loan costs as
discussed in the General QM Final Rule.
Finally, a portion of these consumers
may have obtained non-QM loans under
the baseline, but the Bureau expects
some consumers may not have been able
to obtain a mortgage at all.
2. Benefits to Covered Persons
The final rule’s primary benefit to
covered persons, specifically mortgage
creditors, is the continued profits from
originating QM loans priced 2.25
percentage points or higher above
APOR, particularly Under-43-PercentDTI conventional loans and GSE-eligible
loans. For the estimated 33,000
additional conventional QM loans
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79 Specifically,
among HMDA loans originated in
2018, the Bureau estimates that approximately
2,200 loans per month would have been QM under
the original, DTI-based General QM loan definition
or the Temporary GSE QM loan definition due to
DTI ratios at or below 43 percent or purchase by
a GSE, but would not have been QM under the
revised, price-based General QM loan definition
due to rate spreads over APOR exceeding the
applicable price thresholds. Multiplying this
estimate by the 15-month length of the mandatory
compliance date delay yields the Bureau’s total
estimate of 33,000.
80 This estimate assumes that the GSEs continue
to originate loans priced 2.25 percentage points or
higher above APOR between July 1, 2021 and
October 1, 2022. If the GSEs do not originate loans
above the General QM Final Rule’s pricing
thresholds during this period, the Bureau estimates
that approximately 28,000 additional consumers
would obtain conventional QM loans priced 2.25
percentage points or higher above APOR under the
proposal. This estimate reflects possible impacts of
the rule if the GSE PSPAs prevent the GSEs from
purchasing loans above the pricing thresholds
established in the General QM Final Rule.
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priced 2.25 percentage points or higher
above APOR under the final rule, the
Bureau estimates an average loan size of
$190,000 and thus a total loan volume
of $6.3 billion. Under the baseline, after
July 1, 2021, creditors would have been
unable to originate such loans under the
original, DTI-based General QM loan
definition or the Temporary GSE QM
loan definition and would instead have
had to originate such loans as FHA,
Small Creditor QM, or non-QM loans, or
originate at a price at or below 2.25
percentage points over APOR as General
QM loans. Creditors’ current preference
for originating QM loans priced 2.25
percentage points or more over APOR
likely reflects advantages in a
combination of costs or guarantee fees
(particularly relative to FHA loans),
liquidity (particularly relative to Small
Creditor QM), or litigation and credit
risk (particularly relative to non-QM).
Moreover, QM loans are exempt from
the Dodd-Frank Act risk retention
requirement whereby creditors that
securitize mortgage loans are required to
retain at least 5 percent of the credit risk
of the security, which adds significant
cost. As a result, the final rule conveys
benefits to mortgage creditors
originating General QM and Temporary
GSE QM loans on each of these
dimensions.
Given creditors’ preference for
originating QM loans, the final rule may
allow lenders to avoid price reductions
on some loans that would have been
necessary to satisfy the revised General
QM loan definition under the baseline.
This will increase revenue for creditors
on such loans originated during the July
1, 2021 to October 1, 2022 period.
3. Costs to Consumers
For the duration of the July 1, 2021 to
October 1, 2022 period, creditors that
would have reduced prices on some
loans to satisfy the revised General QM
loan definition under the baseline may
delay reducing loan prices under the
final rule. This is likely to occur for
some uncertain fraction of the estimated
33,000 additional conventional loans
within the original, DTI-based General
QM loan definition and the Temporary
GSE QM loan definition. Consumers
obtaining such loans will pay higher
prices for these conventional QM loans
relative to the baseline.
In addition, consumers who would
have obtained non-QM loans under the
baseline but instead obtain QM loans
under the final rule forgo the benefit of
retaining the ATR causes of action and
defenses against foreclosure.
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4. Costs to Covered Persons
The final rule will involve minimal
costs to covered persons. The most
sizable potential costs to covered
persons are effectively transfers between
creditors for the duration of the
mandatory compliance date delay,
reflecting temporarily reduced loan
origination volume for creditors that
primarily originate FHA or Under-43Percent-DTI non-QM loans and
temporarily increased origination
volume for lenders who primarily
originate Under-43-Percent-DTI
conventional loans priced 2.25
percentage points or more over APOR.
5. Other Benefits and Costs
In delaying the expiration of the
original, DTI-based General QM loan
definition and the Temporary GSE QM
loan definition, the final rule will delay
any effects of the expiration on the
development of the secondary market
for private (non-GSE) mortgage loan
securities. When the Temporary GSE
QM loan definition expires, those loans
that do not fit within the revised
General QM loan definition represent a
potential new market for private
securitizations. Thus, the final rule will
slightly reduce the scope of the
potential non-QM market for the
duration of the mandatory compliance
date delay, likely lowering profits and
revenues for participants in the private
secondary market. This will effectively
be a transfer from these private
secondary market participants to
participants in the agency secondary
market.
E. Specific Impacts of the Final Rule
1. Impact on Depository Institutions and
Credit Unions With $10 Billion or Less
in Total Assets, as Described in Section
1026
The final rule’s expected impact on
depository institutions and credit
unions that are also creditors making
covered loans (depository creditors)
with $10 billion or less in total assets is
similar to the expected impact on larger
creditors and non-depository creditors.
Those smaller creditors originating
portfolio loans can originate Small
Creditor QM loans priced 2.25
percentage points or higher above
APOR, and thus may rely less on the
original, DTI-based General QM loan
definition and the Temporary GSE QM
loan definition for originating such
loans. If the General QM Final Rule’s
mandatory compliance date will confer
a competitive advantage to these small
creditors in their origination of loans
priced 2.25 percentage points or higher
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above APOR, the final rule will delay
this outcome.
2. Impact of the Proposed Provisions on
Consumers in Rural Areas
The final rule’s expected impact on
consumers in rural areas is similar or
slightly larger than the expected impact
on non-rural areas. Based on 2018
HMDA data, the Bureau estimates that
loans priced 2.25 percentage points or
higher above APOR that are either
Under-43-Percent-DTI conventional
loans or GSE-eligible loans reflect a
slightly larger share of the conventional
loan market in rural areas (0.8 percent)
relative to non-rural areas (0.6
percent).81
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VI. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act
(RFA),82 as amended by the Small
Business Regulatory Enforcement
Fairness Act of 1996,83 requires each
agency to consider the potential impact
of its regulations on small entities,
including small businesses, small
governmental units, and small not-forprofit organizations. The RFA defines a
‘‘small business’’ as a business that
meets the size standard developed by
the Small Business Administration
pursuant to the Small Business Act.84
The RFA generally requires an agency
to conduct an initial regulatory
flexibility analysis (IRFA) and a final
regulatory flexibility analysis (FRFA) of
any rule subject to notice-and-comment
rulemaking requirements, unless the
agency certifies that the rule would not
have a significant economic impact on
a substantial number of small entities.85
The Bureau also is subject to certain
additional procedures under the RFA
involving the convening of a panel to
consult with small business
representatives prior to proposing a rule
for which an IRFA is required.86
In the proposal, the Bureau certified
that an IRFA was not required because
the proposal, if adopted, would not have
a significant economic impact on a
substantial number of small entities.
The Bureau did not receive comments
on its analysis of the impact of the
proposal on small entities. The Bureau
does not expect the final rule to impose
81 These statistics are estimated based on
originations from the first nine months of the year,
to allow time for loans to be sold before HMDA
reporting deadlines.
82 5 U.S.C. 601 et seq.
83 Public Law 104–121, tit. II, 110 Stat. 857
(1996).
84 5 U.S.C. 601(3) (the Bureau may establish an
alternative definition after consultation with the
Small Business Administration and an opportunity
for public comment).
85 5 U.S.C. 603 through 605.
86 5 U.S.C. 609.
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costs on small entities relative to the
baseline. Under the baseline, on July 1,
2021, the Temporary GSE QM loan
definition and the original, DTI-based
General QM loan definition expire, and
therefore no creditor—including small
entities—would have been able to
originate QM loans under either
definition after that date. Under the
final rule, small entities that would
otherwise not have been able to
originate QM loans under these
definitions will be able to originate such
loans with QM status until October 1,
2022. Thus, the Bureau anticipates that
the final rule will only reduce burden
on small entities relative to the baseline.
Accordingly, the Acting Director
certifies that this final rule will not have
a significant economic impact on a
substantial number of small entities.
the authority to electronically sign this
document to Laura Galban, a Bureau
Federal Register Liaison, for purposes of
publication in the Federal Register.
VII. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA),87 Federal agencies are
generally required to seek, prior to
implementation, approval from the
Office of Management and Budget
(OMB) for information collection
requirements. Under the PRA, the
Bureau may not conduct or sponsor,
and, notwithstanding any other
provision of law, a person is not
required to respond to, an information
collection unless the information
collection displays a valid control
number assigned by OMB.
The final rule will amend 12 CFR part
1026 (Regulation Z), which implements
TILA. OMB control number 3170–0015
is the Bureau’s OMB control number for
Regulation Z. The Bureau has
determined that this final rule does not
contain any new or substantively
revised information collection
requirements other than those
previously approved by OMB under that
OMB control number 3170–0015.
■
VIII. Congressional Review Act
Pursuant to the Congressional Review
Act,88 the Bureau will submit a report
containing this rule and other required
information to the U.S. Senate, the U.S.
House of Representatives, and the
Comptroller General of the United
States at least 60 days prior to the rule’s
published effective date. The Office of
Information and Regulatory Affairs has
designated this rule as a ‘‘major rule’’ as
defined by 5 U.S.C. 804(2).
IX. Signing Authority
The Acting Director of the Bureau,
David Uejio, having reviewed and
approved this document, is delegating
87 44
88 5
PO 00000
U.S.C. 3501 et seq.
U.S.C. 801 et seq.
Frm 00021
Fmt 4700
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List of Subjects in 12 CFR Part 1026
Advertising, Banks, banking,
Consumer protection, Credit, Credit
unions, Mortgages, National banks,
Reporting and recordkeeping
requirements, Savings associations,
Truth-in-lending.
Authority and Issuance
For the reasons set forth in the
preamble, the Bureau amends
Regulation Z, 12 CFR part 1026, as set
forth below:
PART 1026—TRUTH IN LENDING
(REGULATION Z)
1. The authority citation for part 1026
continues to read as follows:
Authority: 12 U.S.C. 2601, 2603–2605,
2607, 2609, 2617, 3353, 5511, 5512, 5532,
5581; 15 U.S.C. 1601 et seq.
2. In supplement I to part 1026:
a. Under Section 1026.43—Minimum
Standards for Transactions Secured by
a Dwelling, revise introductory
paragraph 2;
■ b. Under section 43(e)(2) Qualified
mortgage defined—general, add
paragraph 1; and
■ c. Revise section 43(e)(4) Qualified
mortgage defined—other agencies.
The revisions and addition read as
follows:
■
■
Supplement I to Part 1026—Official
Interpretations
*
*
*
*
*
Section 1026.43—Minimum Standards for
Transactions Secured by a Dwelling
*
*
*
*
*
2. General QM Amendments Effective on
March 1, 2021. The Bureau’s revisions to
Regulation Z contained in Qualified
Mortgage Definition Under the Truth in
Lending Act (Regulation Z): General QM
Loan Definition published on December 29,
2020 (2021 General QM Amendments) apply
with respect to transactions for which a
creditor received an application on or after
March 1, 2021 (effective date). Compliance
with the 2021 General QM Amendments is
mandatory with respect to transactions for
which a creditor received an application on
or after October 1, 2022 (mandatory
compliance date). For a given transaction for
which a creditor received an application on
or after March 1, 2021 but prior to October
1, 2022, a person has the option of complying
either: With 12 CFR part 1026 as it is in
effect; or with 12 CFR part 1026 as it was in
effect on February 26, 2021, together with
any amendments to 12 CFR part 1026 that
become effective after February 26, 2021,
other than the 2021 General QM
Amendments. For transactions subject to
E:\FR\FM\30APR1.SGM
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22860
Federal Register / Vol. 86, No. 82 / Friday, April 30, 2021 / Rules and Regulations
§ 1026.19(e), (f), or (g), creditors determine
the date the creditor received the consumer’s
application, for purposes of this comment, in
accordance with § 1026.2(a)(3)(ii). For
transactions that are not subject to
§ 1026.19(e), (f), or (g), creditors can
determine the date the creditor received the
consumer’s application, for purposes of this
comment, in accordance with either
§ 1026.2(a)(3)(i) or (ii).
*
*
*
*
*
43(e)(2) Qualified mortgage defined—
general.
1. General QM Amendments Effective on
March 1, 2021. Comment 43–2 provides that,
for a transaction for which a creditor received
an application on or after March 1, 2021 but
prior to October 1, 2022, a person has the
option of complying either: With 12 CFR part
1026 as it is in effect; or with 12 CFR part
1026 as it was in effect on February 26, 2021,
together with any amendments to 12 CFR
part 1026 that become effective after
February 26, 2021, other than the revisions
to Regulation Z contained in Qualified
Mortgage Definition Under the Truth in
Lending Act (Regulation Z): General QM
Loan Definition published on December 29,
2020 (2021 General QM Amendments). Prior
to the effective date of the 2021 General QM
Amendments, § 1026.43(e)(2) provided a
qualified mortgage definition that, among
other things, required that the ratio of the
consumer’s total monthly debt to total
monthly income at the time of consummation
not exceed 43 percent. The 2021 General QM
Amendments removed that requirement and
replaced it with the annual percentage rate
thresholds in § 1026.43(e)(2)(vi), among other
revisions. Both the qualified mortgage
definition in § 1026.43(e)(2) that was in effect
prior to the 2021 General QM Amendments
and the qualified mortgage definition in
§ 1026.43(e)(2) as amended by the 2021
General QM Amendments are available to
creditors for transactions for which a creditor
received an application on or after March 1,
2021 but prior to October 1, 2022. See
comment 43–2 for an explanation of how
creditors determine the date the creditor
received the consumer’s application for
purposes of that comment.
jbell on DSKJLSW7X2PROD with RULES
*
*
*
*
*
43(e)(4) Qualified mortgage defined—other
agencies.
1. General. The Department of Housing and
Urban Development, Department of Veterans
Affairs, and the Department of Agriculture
have promulgated definitions for qualified
mortgages under mortgage programs they
insure, guarantee, or provide under
applicable law. Cross-references to those
definitions are listed in § 1026.43(e)(4) to
acknowledge the covered transactions
covered by those definitions are qualified
mortgages for purposes of this section.
2. Mortgages for which the creditor
received the consumer’s application prior to
October 1, 2022. Covered transactions that
met the requirements of § 1026.43(e)(2)(i)
through (iii), were eligible for purchase or
guarantee by the Federal National Mortgage
Association (Fannie Mae) or the Federal
Home Loan Mortgage Corporation (Freddie
Mac) (or any limited-life regulatory entity
succeeding the charter of either) operating
VerDate Sep<11>2014
16:13 Apr 29, 2021
Jkt 253001
under the conservatorship or receivership of
the Federal Housing Finance Agency
pursuant to section 1367 of the Federal
Housing Enterprises Financial Safety and
Soundness Act of 1992 (12 U.S.C. 4617), and
for which the creditor received the
consumer’s application prior to the
mandatory compliance date of October 1,
2022, continue to be qualified mortgages for
the purposes of this section, including those
covered transactions that were consummated
on or after October 1, 2022.
3. Mortgages for which the creditor
received the consumer’s application on or
after March 1, 2021 but prior to October 1,
2022. For a discussion of the optional early
compliance period for the 2021 General QM
Amendments, please see comment 43–2.
4. [Reserved].
5. [Reserved].
11.43 and 11.45, by any of the following
methods:
• Federal eRulemaking Portal: Go to
https://www.regulations.gov. Follow the
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: U.S. Department of
Transportation, Docket Operations, M–
30, West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590.
• Hand Delivery: Deliver to Mail
address above between 9 a.m. and 5
p.m., Monday through Friday, except
Federal holidays.
Examining the AD Docket
[Docket No. FAA–2021–0319; Project
Identifier AD–2021–00443–T; Amendment
39–21521; AD 2021–09–08]
You may examine the AD docket at
https://www.regulations.gov by
searching for and locating Docket No.
FAA–2021–0319; or in person at Docket
Operations between 9 a.m. and 5 p.m.,
Monday through Friday, except Federal
holidays. The AD docket contains this
final rule, any comments received, and
other information. The street address for
Docket Operations is listed above.
FOR FURTHER INFORMATION CONTACT: Julio
Alvarez, Aerospace Engineer, Systems
and Equipment Section, FAA, Seattle
ACO Branch, 2200 South 216th St., Des
Moines, WA 98198; phone and fax: 206–
231–3500; email: 9-FAA-SACO-ADInquiry@faa.gov.
SUPPLEMENTARY INFORMATION:
RIN 2120–AA64
Background
*
*
*
*
*
Dated: April 26, 2021.
Laura Galban,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2021–09028 Filed 4–29–21; 8:45 am]
BILLING CODE 4810–AM–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 39
Airworthiness Directives; The Boeing
Company Airplanes
Federal Aviation
Administration (FAA), DOT.
ACTION: Final rule; request for
comments.
AGENCY:
The FAA is adopting a new
airworthiness directive (AD) for certain
The Boeing Company Model 737–8 and
737–9 airplanes. This AD was prompted
by manufacturing design changes to
certain metallic support panel
assemblies installed in the flight deck,
which resulted in insufficient electrical
bonding of the panels and consequent
insufficient electrical grounding of
installed equipment. This AD requires
modification of the electrical bonding of
these assemblies to provide sufficient
electrical grounding for equipment
installed in the flight deck. The FAA is
issuing this AD to address the unsafe
condition on these products.
DATES: This AD is effective April 30,
2021.
The FAA must receive comments on
this AD by June 14, 2021.
ADDRESSES: You may send comments,
using the procedures found in 14 CFR
SUMMARY:
PO 00000
Frm 00022
Fmt 4700
Sfmt 4700
The FAA has received a report of an
electrical bonding and grounding issue
that was discovered during testing of a
newly manufactured Boeing Model 737–
8 airplane. During standard production
testing by Boeing, electrical power
systems did not perform as expected.
Investigation identified insufficient
bonding of certain metallic support
panel assemblies installed in two areas
of the flight deck, which affects the
electrical grounding of installed
equipment. The reported event occurred
prior to delivery of that airplane.
Investigation identified design changes
to the flight deck support panel
assemblies, which affected the
dedicated bonding and grounding paths
that existed prior to the changes. The
affected areas are the P6 panel assembly,
including the mounting tray for the
standby power control unit (SPCU),
located behind the first officer, and the
main instrument panel (MIP) assembly
located in front of and between the
captain and first officer. The issue
affects certain Boeing Model 737–8 and
737–9 airplanes manufactured after the
design changes were implemented. All
affected in-service airplanes passed all
testing prior to delivery, and there have
E:\FR\FM\30APR1.SGM
30APR1
Agencies
[Federal Register Volume 86, Number 82 (Friday, April 30, 2021)]
[Rules and Regulations]
[Pages 22844-22860]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09028]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Part 1026
[Docket No. CFPB-2021-0003]
RIN 3170-AA98
Qualified Mortgage Definition Under the Truth in Lending Act
(Regulation Z): General QM Loan Definition; Delay of Mandatory
Compliance Date
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Final rule; official interpretation.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing this final rule to delay until October 1, 2022 the mandatory
compliance date for the final rule titled Qualified Mortgage Definition
under the Truth in Lending
[[Page 22845]]
Act (Regulation Z): General QM Loan Definition (General QM Final Rule).
The Bureau is taking this action to help ensure access to responsible,
affordable mortgage credit and to preserve flexibility for consumers
affected by the COVID-19 pandemic and its economic effects.
DATES: Effective date: This final rule is effective on June 30, 2021.
Compliance date: Compliance with the final rule published December
29, 2020, at 85 FR 86308, is delayed until October 1, 2022.
FOR FURTHER INFORMATION CONTACT: Waeiz Syed, Counsel or Ben Cady,
Senior Counsel, Office of Regulations, at 202-435-7700. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION:
I. Summary of the Final Rule
The Ability-to-Repay/Qualified Mortgage Rule (ATR/QM Rule) requires
a creditor to make a reasonable, good faith determination of a
consumer's ability to repay a residential mortgage loan according to
its terms. Loans that meet the ATR/QM Rule's requirements for qualified
mortgages (QMs) obtain certain protections from liability. The ATR/QM
Rule defines several categories of QMs.
One QM category defined in the ATR/QM Rule is the General QM
category. General QMs must comply with the ATR/QM Rule's prohibitions
on certain loan features, points-and-fees limits, and underwriting
requirements. Under the original ATR/QM Rule, the ratio of the
consumer's total monthly debt to total monthly income (DTI or DTI
ratio) could not exceed 43 percent for a loan to meet the General QM
loan definition (original, DTI-based General QM loan definition).\1\ In
December 2020, the Bureau issued the General QM Final Rule, which
amended Regulation Z by replacing the original, DTI-based General QM
loan definition with a limit based on loan pricing and by making other
changes to the General QM loan definition (revised, price-based General
QM loan definition).\2\ The General QM Final Rule took effect on March
1, 2021, and it provided a mandatory compliance date of July 1, 2021.
Under the General QM Final Rule, as issued in December 2020, for
covered transactions for which creditors receive an application on or
after the March 1, 2021 effective date but prior to the July 1, 2021
mandatory compliance date, creditors had the option of complying with
either the original, DTI-based General QM loan definition or the
revised, price-based General QM loan definition. Only the revised,
price-based General QM loan definition would have been available for
applications received on or after the July 1, 2021 mandatory compliance
date.
---------------------------------------------------------------------------
\1\ 12 CFR 1026.43(e)(2)(vi), as was in effect on February 26,
2021.
\2\ 85 FR 86308 (Dec. 29, 2020).
---------------------------------------------------------------------------
On March 3, 2021, the Bureau released for public comment a proposal
to delay the General QM Final Rule's mandatory compliance date from
July 1, 2021 to October 1, 2022. After considering the comments, the
Bureau is issuing this final rule delaying the General QM Final Rule's
mandatory compliance date as proposed. Specifically, this final rule
amends comments 43-2 and 43(e)(4)-2 and -3 to reflect a delay of the
mandatory compliance date by changing the date ``July 1, 2021'' where
it appears in those comments to ``October 1, 2022.'' The final rule
also adds new comment 43(e)(2)-1 to clarify the General QM loan
definitions available to creditors for applications received on or
after March 1, 2021, but prior to October 1, 2022.
For covered transactions for which creditors receive an application
on or after March 1, 2021, but prior to October 1, 2022, creditors will
have the option of complying with either the original, DTI-based
General QM loan definition or the revised, price-based General QM loan
definition. Under the final rule, only the revised, price-based General
QM loan definition will be available for applications received on or
after the October 1, 2022 mandatory compliance date.
The ATR/QM Rule also defines a temporary category of QMs that is
also affected by this final rule. That temporary category of QMs
includes mortgages that (1) comply with the same loan-feature
prohibitions and points-and-fees limits as General QMs and (2) are
eligible to be purchased or guaranteed by either the Federal National
Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage
Corporation (Freddie Mac) (collectively, the government-sponsored
enterprises or GSEs), while operating under the conservatorship or
receivership of the Federal Housing Finance Agency (FHFA). This final
rule refers to these loans as Temporary GSE QM loans, and the provision
that created this loan category is commonly known as the GSE Patch. In
October 2020, the Bureau issued a final rule stating that the Temporary
GSE QM loan definition will be available only for covered transactions
for which the creditor receives the consumer's application before the
mandatory compliance date of the General QM Final Rule.\3\ Under the
General QM Final Rule, the Temporary GSE QM loan definition would have
expired on the earlier of July 1, 2021 or the date the applicable GSE
exits Federal conservatorship. Under this final rule, the Temporary GSE
QM loan definition will expire upon the earlier of October 1, 2022, or
the date the applicable GSE exits Federal conservatorship.
---------------------------------------------------------------------------
\3\ 85 FR 67938 (Oct. 26, 2020).
---------------------------------------------------------------------------
As discussed below, this final rule delays the mandatory compliance
date of the General QM Final Rule to help ensure access to responsible,
affordable mortgage credit and to preserve flexibility for consumers
affected by the COVID-19 pandemic and its economic effects. This final
rule does not make any other changes to the General QM loan definition.
The Bureau plans to evaluate the General QM Final Rule's amendments to
the General QM loan definition and will consider at a later date
whether to initiate another rulemaking to reconsider other aspects of
the General QM loan definition.
The effective date of this final rule is June 30, 2021.
II. Background
A. Dodd-Frank Act Amendments to the Truth in Lending Act and the
General QM Loan Definition
The Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank Act) \4\ amended the Truth in Lending Act (TILA) \5\ to
establish, among other things, ability-to-repay (ATR) requirements in
connection with the origination of most residential mortgage loans.\6\
As amended by the Dodd-Frank Act, TILA prohibits a creditor from making
a residential mortgage loan unless the creditor makes a reasonable and
good faith determination based on verified and documented information
that the consumer has a reasonable ability to repay the loan.\7\ TILA
identifies the factors a creditor must consider in making a reasonable
and good faith
[[Page 22846]]
assessment of a consumer's ability to repay. These factors are the
consumer's credit history, current and expected income, current
obligations, DTI ratio or residual income after paying non-mortgage
debt and mortgage-related obligations, employment status, and other
financial resources other than equity in the dwelling or real property
that secures repayment of the loan.\8\
---------------------------------------------------------------------------
\4\ Pub. L. 111-203, 124 Stat. 1376 (2010).
\5\ 15 U.S.C. 1601 et seq.
\6\ Dodd-Frank Act sections 1411-12, 1414, 124 Stat. 1376, 2142-
49; 15 U.S.C. 1639c.
\7\ 15 U.S.C. 1639c(a)(1). TILA section 103 defines
``residential mortgage loan'' to mean, with some exceptions
including open-end credit plans, ``any consumer credit transaction
that is secured by a mortgage, deed of trust, or other equivalent
consensual security interest on a dwelling or on residential real
property that includes a dwelling.'' 15 U.S.C. 1602(dd)(5). TILA
section 129C also exempts certain residential mortgage loans from
the ATR requirements. See, e.g., 15 U.S.C. 1639c(a)(8) (exempting
reverse mortgages and temporary or bridge loans with a term of 12
months or less).
\8\ 15 U.S.C. 1639c(a)(3).
---------------------------------------------------------------------------
A creditor may not be certain whether its ATR determination is
reasonable in a particular case. TILA addresses this potential
uncertainty by defining a category of loans--called QMs--for which a
creditor ``may presume that the loan has met'' the ATR requirements.\9\
The statute generally defines a QM to mean any residential mortgage
loan for which:
---------------------------------------------------------------------------
\9\ 15 U.S.C. 1639c(b)(1).
---------------------------------------------------------------------------
The loan does not have negative amortization, interest-
only payments, or balloon payments;
The loan term does not exceed 30 years;
The total points and fees generally do not exceed 3
percent of the loan amount;
The income and assets relied upon for repayment are
verified and documented;
The underwriting uses a monthly payment based on the
maximum rate during the first five years, uses a payment schedule that
fully amortizes the loan over the loan term, and takes into account all
mortgage-related obligations; and
The loan complies with any guidelines or regulations
established by the Bureau relating to the ratio of total monthly debt
to monthly income or alternative measures of ability to pay regular
expenses after payment of total monthly debt.\10\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 1639c(b)(2)(A).
---------------------------------------------------------------------------
In January 2013, the Bureau issued a final rule amending Regulation
Z to implement TILA's ATR requirements and define several categories of
QM loans (January 2013 Final Rule).\11\ This final rule refers to the
January 2013 Final Rule and later amendments \12\ to it collectively as
the ATR/QM Rule or the Rule. One category of QMs defined by the ATR/QM
Rule consists of General QMs. The January 2013 Final Rule provided that
a loan was a General QM if:
---------------------------------------------------------------------------
\11\ 78 FR 6408 (Jan. 30, 2013).
\12\ As discussed in part II.C below, the Bureau made several
amendments to the ATR/QM Rule in 2020. Prior to 2020, the Bureau
made several other amendments to the ATR/QM Rule. See 78 FR 35429
(June 12, 2013); 78 FR 44686 (July 24, 2013); 78 FR 60382 (Oct. 1,
2013); 79 FR 65300 (Nov. 3, 2014); 80 FR 59944 (Oct. 2, 2015); 81 FR
16074 (Mar. 25, 2016); 85 FR 67938 (Oct. 26, 2020).
---------------------------------------------------------------------------
The loan does not have negative-amortization, interest-
only, or balloon-payment features, a term that exceeds 30 years, or
points and fees that exceed specified limits; \13\
---------------------------------------------------------------------------
\13\ 12 CFR 1026.43(e)(2)(i) through (iii).
---------------------------------------------------------------------------
The creditor underwrites the loan based on a fully
amortizing schedule using the maximum rate permitted during the first
five years; \14\
---------------------------------------------------------------------------
\14\ 12 CFR 1026.43(e)(2)(iv).
---------------------------------------------------------------------------
The creditor considers and verifies the consumer's income
and debt obligations in accordance with appendix Q; \15\ and
---------------------------------------------------------------------------
\15\ 12 CFR 1026.43(e)(2)(v), as was in effect on February 26,
2021.
---------------------------------------------------------------------------
The consumer's DTI ratio is no more than 43 percent,
determined in accordance with appendix Q.\16\
---------------------------------------------------------------------------
\16\ 12 CFR 1026.43(e)(2)(vi), as was in effect on February 26,
2021.
---------------------------------------------------------------------------
Appendix Q contained standards for calculating and verifying debt
and income for purposes of determining whether a mortgage satisfies the
43 percent debt-to-income ratio limit (DTI limit) for General QMs. The
standards in appendix Q were adapted from guidelines maintained by the
Federal Housing Administration (FHA) when the January 2013 Final Rule
was issued.\17\
---------------------------------------------------------------------------
\17\ 78 FR 6408, 6527-28 (Jan. 30, 2013) (noting that appendix Q
incorporates, with certain modifications, the definitions and
standards in HUD Handbook 4155.1, Mortgage Credit Analysis for
Mortgage Insurance on One-to-Four-Unit Mortgage Loans).
---------------------------------------------------------------------------
As discussed above, another category of QMs defined by the January
2013 Final Rule, Temporary GSE QMs, consists of mortgages that (1)
comply with the ATR/QM Rule's prohibitions on certain loan features and
its limitations on points and fees \18\ and (2) are eligible to be
purchased or guaranteed by either GSE while under the conservatorship
of FHFA.\19\ Unlike for General QMs, the January 2013 Final Rule did
not prescribe a DTI limit for Temporary GSE QMs nor did it require use
of appendix Q to verify and calculate debt, income, and DTI ratios. The
January 2013 Final Rule provided that the Temporary GSE QM loan
definition would expire with respect to each GSE when that GSE ceases
to operate under conservatorship or on January 10, 2021, whichever
occurred first.\20\
---------------------------------------------------------------------------
\18\ 12 CFR 1026.43(e)(2)(i) through (iii).
\19\ 12 CFR 1026.43(e)(4), as was in effect on February 26,
2021.
\20\ 12 CFR 1026.43(e)(4)(ii)(A) and 1026.43(e)(4)(iii)(B), as
was in effect on February 26, 2021.
---------------------------------------------------------------------------
In 2020, the Bureau issued three final rules amending the ATR/QM
Rule, two of which relate to this final rule.\21\ These two final rules
are discussed below.
---------------------------------------------------------------------------
\21\ The third rule amending the ATR/QM Rule that the Bureau
issued in 2020 was the Seasoned QM Final Rule. See 85 FR 86402 (Dec.
29, 2020).
---------------------------------------------------------------------------
1. The Patch Extension Final Rule
The Bureau issued the Patch Extension Final Rule on October 20,
2020. It was published in the Federal Register on October 26, 2020.\22\
The Patch Extension Final Rule amended Regulation Z to replace the
January 10, 2021 sunset date of the Temporary GSE QM loan definition
with a provision stating that the Temporary GSE QM loan definition will
be available only for covered transactions for which the creditor
receives the consumer's application before the mandatory compliance
date of final amendments to the General QM loan definition in
Regulation Z. The Patch Extension Final Rule did not amend the clause
providing that the Temporary GSE QM loan definition expires on the date
the applicable GSE exits Federal conservatorship. Therefore, under the
Patch Extension Final Rule, the Temporary GSE QM loan definition will
expire on the mandatory compliance date of final amendments to the
General QM loan definition or the date the applicable GSE exits Federal
conservatorship, whichever comes first.
---------------------------------------------------------------------------
\22\ 85 FR 67938 (Oct. 26, 2020).
---------------------------------------------------------------------------
2. The General QM Final Rule
The Bureau issued the General QM Final Rule on December 10, 2020.
It was published in the Federal Register on December 29, 2020.\23\ The
General QM Final Rule amended Regulation Z to remove the General QM
loan definition's DTI limit (and appendix Q) and replace it with limits
based on the loan's pricing. Under the amended rule, a loan meets the
General QM loan definition only if the annual percentage rate (APR)
exceeds the average prime offer rate (APOR) for a comparable
transaction by less than 2.25 percentage points as of the date the
interest rate is set. The General QM Final Rule provided higher
thresholds for loans with smaller loan amounts, for certain
manufactured housing loans, and for subordinate-lien transactions. The
General QM Final Rule requires the creditor to consider the consumer's
DTI ratio or residual income and to consider and verify the consumer's
income or assets other than the value of the dwelling and the
consumer's debts. The General QM Final Rule also provides a safe harbor
for compliance with this verification requirement if a creditor
complies with verification standards in
[[Page 22847]]
certain manuals listed in the rule.\24\ The General QM Final Rule had
an effective date of March 1, 2021, and a mandatory compliance date of
July 1, 2021.
---------------------------------------------------------------------------
\23\ 85 FR 86308 (Dec. 29, 2020).
\24\ See comment 43(e)(2)(v)(B)-3.i.
---------------------------------------------------------------------------
B. February 2021 Statement Regarding General QM and Seasoned QM Final
Rules
On February 23, 2021, the Bureau issued a statement titled
``Statement on Mandatory Compliance Date of General QM Final Rule and
Possible Reconsideration of General QM Final Rule and Seasoned QM Final
Rule'' (February 23, 2021 Statement or Statement).\25\ The Statement
was published in the Federal Register on February 26, 2021.\26\ In it,
the Bureau stated, in relevant part, that it expected to issue a
proposal to delay the July 1, 2021 mandatory compliance date of the
General QM Final Rule. The Bureau stated that it would consider at a
later date whether to initiate another rulemaking to reconsider other
aspects of the General QM loan definition. The Statement also indicated
that the Bureau is considering whether to initiate a rulemaking to
revisit another final rule that it issued in December 2020, the
Seasoned QM Final Rule.\27\
---------------------------------------------------------------------------
\25\ Bureau of Consumer Fin. Prot., Statement on Mandatory
Compliance Date of General QM Final Rule and Possible
Reconsideration of General QM Final Rule and Seasoned QM Final Rule
(Feb. 23, 2021), https://www.consumerfinance.gov/documents/9505/cfpb_qm-statement_2021-02.pdf.
\26\ 86 FR 11623 (Feb. 26, 2021).
\27\ 85 FR 86402 (Dec. 29, 2020).
---------------------------------------------------------------------------
C. The General QM Mandatory Compliance Date Delay Proposal
On March 3, 2021, the Bureau released a proposal to delay the
General QM Final Rule's mandatory compliance date from July 1, 2021 to
October 1, 2022 (the proposal). The proposal was published in the
Federal Register on March 5, 2021.\28\ In the proposal, the Bureau
preliminarily concluded that delaying the mandatory compliance date to
October 1, 2022 would help ensure access to responsible, affordable
mortgage credit and preserve flexibility for consumers affected by the
COVID-19 pandemic and its economic effects. The comment period for the
proposal ended on April 5, 2021. The Bureau received 24 unique comments
on the proposal. The Bureau summarizes and responds to these comments
in part IV below.
---------------------------------------------------------------------------
\28\ 86 FR 12839 (Mar. 5, 2021).
---------------------------------------------------------------------------
D. The Effects of the COVID-19 Pandemic on the Mortgage Markets
As discussed above and in the proposal, the Bureau is delaying the
General QM Final Rule's mandatory compliance date to help those
affected by the COVID-19 pandemic and its economic effects. The General
QM Final Rule acknowledged that the COVID-19 pandemic has had a
significant effect on the U.S. economy. In the early months of the
pandemic, economic activity contracted, millions of workers became
unemployed, and mortgage markets were affected. Although the
unemployment rate has declined from a high of 14.8 percent in April
2020 to 6.0 percent in March 2021,\29\ unemployment remains elevated
relative to the pre-pandemic rate of 3.5 percent in February 2020, and
the labor force participation rate remains below pre-pandemic levels,
at 61.5 percent in March 2021 versus 63.3 percent in February 2020. The
housing market has seen a significant rebound in mortgage-origination
activity, buoyed by historically low interest rates and by an
increasingly large share of GSE-backed loans. However, the share of
origination activity outside the GSE-backed origination channel has
declined from pre-pandemic levels, and mortgage-credit availability for
many consumers--including those who would be dependent on the non-QM
market for financing--remains tighter than prior to the pandemic.\30\
The pandemic's impact on both the secondary market for new originations
and on the servicing of existing mortgages is described below.
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\29\ News Release, Bureau of Labor Statistics, U.S. Dep't of
Labor, USDL-21-0582, The Employment Situation (Apr. 2, 2021),
https://www.bls.gov/charts/employment-situation/civilian-unemployment-rate.htm, and https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm (charts
related to the Apr. 2, 2021 The Employment Situation news release).
\30\ Brandon Ivey, Expanded-Credit Originations See Recovery in
4Q20, Inside Mortg. Fin. (Mar. 12, 2021), https://www.insidemortgagefinance.com/articles/220770-expanded-credit-mortgage-originations-slowly-recovering-from-shock.
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1. Secondary Market Impacts and Implications for Mortgage Origination
Markets
The early economic disruptions associated with the COVID-19
pandemic restricted the flow of credit in the U.S. economy,
particularly as uncertainty rose in mid-March 2020, and investors moved
rapidly towards cash and government securities.\31\ The lack of
investor demand to purchase mortgages, combined with a large supply of
agency mortgage-backed securities (MBS) entering the market,\32\
resulted in widening spreads between the rates on a 10-year Treasury
note and mortgage interest rates.\33\ This dynamic made it difficult
for creditors to originate loans, as many creditors rely on the ability
to profitably sell loans in the secondary market to generate the
liquidity to originate new loans. This resulted in mortgages becoming
more expensive for both homebuyers and homeowners looking to refinance.
After the actions taken by the Board of Governors of the Federal
Reserve System (Board) in March 2020 to purchase agency MBS ``in the
amounts needed to support smooth market functioning and effective
transmission of monetary policy to broader financial conditions and the
economy,'' \34\ market conditions improved substantially.\35\ This
helped to stabilize the MBS market and resulted in a decline in
mortgage rates and a significant increase in refinance activity since
the Board's intervention.
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\31\ The Coronavirus Aid, Relief, and Economic Security Act,
CARES Act: Hearing on The Quarterly CARES Act Report to Congress
Before the S. Comm. on Banking, Hous., & Urban Affairs, 116th Cong.
2-3 (2020) (statement of Jerome H. Powell, Chairman, Bd. of
Governors of the Fed. Reserve Sys.), https://www.banking.senate.gov/imo/media/doc/Powell%20Testimony%205-19-20.pdf (CARES Act Hearing).
\32\ Agency MBS are backed by loans guaranteed by Fannie Mae,
Freddie Mac, and the Government National Mortgage Association
(Ginnie Mae).
\33\ Laurie Goodman et al., Urban Inst., Housing Finance at a
Glance, Monthly Chartbook (Mar. 26, 2020), https://www.urban.org/sites/default/files/publication/101926/housing-finance-at-a-glance-a-monthly-chartbook-march-2020.pdf (Housing Finance at a Glance) (on
file).
\34\ Press Release, Bd. of Governors of the Fed. Reserve Sys.,
Federal Reserve announces extensive new measures to support the
economy (Mar. 23, 2020), https://www.federalreserve.gov/newsevents/pressreleases/monetary20200323b.htm.
\35\ CARES Act Hearing, supra note 30, at 3.
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Because non-agency MBS \36\ are generally perceived by investors as
riskier than agency MBS, the market for non-agency and non-QM mortgage
credit significantly contracted in the early months of the pandemic.
Issuance of non-agency MBS declined by 8.2 percent in the first quarter
of 2020, with nearly all the transactions completed in January and
February before the COVID-19 pandemic began to affect the economy
significantly.\37\ Nearly all major non-QM creditors ceased making
loans in March and April 2020. The non-QM market has since been
recovering, with strong investor demand for non-QM MBS due to better-
than-expected performance during the pandemic.\38\ Many non-QM
creditors--
[[Page 22848]]
which largely depend on the ability to sell loans in the secondary
market in order to fund new loans--have resumed originations, although
some continue to maintain tighter underwriting requirements compared to
prior to the pandemic.\39\ Other creditors that have typically
specialized in non-QM financing have shifted their focus to GSE
originations due to historically low interest rates and the relative
speed and ease with which GSE loans can be originated. Nonetheless,
many non-QM creditors and investors expect the non-agency market to
continue to strengthen in 2021 and recover to its pre-pandemic levels
of production.\40\ Because many of these loans that were historically
considered non-QM may qualify for QM status under the revised, price-
based General QM loan definition, it is unclear how quickly the market
for non-QM loans that fall outside of existing QM definitions will
develop.
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\36\ Non-agency MBS are not backed by loans guaranteed by Fannie
Mae, Freddie Mac, or Ginnie Mae. This includes securities
collateralized by non-QM loans.
\37\ Brandon Ivey, Non-Agency MBS Issuance Slowed in First
Quarter, Inside Mortg. Fin. (Apr. 3, 2020), https://www.insidemortgagefinance.com/articles/217623-non-agency-mbs-issuance-slowed-in-first-quarter (on file).
\38\ Bandon Ivey, Non-QM MBS Issuers Ready. But Where Are the
Loans?, Inside Mortg. Fin. (Jan. 29, 2021), https://www.insidemortgagefinance.com/articles/220373-non-qm-originations-and-mbs-ready-to-rebound-after-the-refi-boom (on file).
\39\ Brandon Ivey, Expanded-Credit Lending Inches Up in Third
Quarter, Inside Mortg. Fin. (Nov. 25, 2020), https://www.insidemortgagefinance.com/articles/219861-expanded-credit-lending-ticks-up-in-3q-amid-slow-recovery (on file).
\40\ Brandon Ivey, Outlook on Non-Agency MBS Issuance: Bright
and Gloomy, Inside Mortg. Fin. (Jan. 15, 2021), https://www.insidemortgagefinance.com/articles/220261-mixed-views-on-the-outlook-for-non-agency-mbs-issuance-in-2021 (on file).
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As illustrated in Figure 1, the GSEs continue to play a dominant
role in the market recovery, with the GSE share of first-lien mortgage
originations at 59 percent in 2020, up from 43 percent in 2019. One
analysis found that the FHA and U.S. Department of Veterans Affairs
(VA) share declined slightly to 18 percent from 19 percent a year
prior.\41\ Portfolio lending declined to 21 percent in 2020, down from
36 percent in the third quarter of 2019, and private label
securitizations declined to 1 percent from 2 percent a year prior.
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\41\ Laurie Goodman et al., Urban Inst., Housing Finance at a
Glance, Monthly Chartbook (Feb. 2021), https://www.urban.org/sites/default/files/publication/103746/housing-finance-at-a-glance-a-monthly-chartbook-february-2021_0.pdf (Housing Finance at a Glance).
[GRAPHIC] [TIFF OMITTED] TR30AP21.004
2. Servicing Market Impacts and Implications for Origination Markets
In addition to the direct impact on origination volume and
composition, the pandemic's impact on the mortgage servicing market has
downstream effects on mortgage originations, as many of the same
entities both originate and service mortgages. Anticipating that a
number of homeowners would struggle to pay their mortgages due to the
pandemic and related economic impacts, Congress passed and the
President signed into law the Coronavirus Aid, Relief, and Economic
Security Act (CARES Act) \42\ in March 2020. The CARES Act provides
certain protections for borrowers with federally backed mortgages, such
as those whose mortgages are purchased or securitized by a GSE or
insured or guaranteed by the FHA, VA, or U.S. Department of Agriculture
(USDA). The CARES Act mandated a 60-day foreclosure moratorium for such
mortgages and allowed borrowers to request up to 180 days of
forbearance due to a COVID-19-related financial hardship, with an
option to extend the forbearance period for an additional 180 days.
---------------------------------------------------------------------------
\42\ Public Law 116-136, 134 Stat. 281 (2020).
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[[Page 22849]]
FHFA recently announced that borrowers with a mortgage backed by
the GSEs may be eligible for two additional three-month forbearance
extensions, for a total of up to 18 months of forbearance, for certain
borrowers who began a COVID-19 forbearance on or before February 28,
2021. On February 16, 2021, FHA, VA, and USDA also provided up to six
months of additional mortgage forbearance, in three-month increments,
for borrowers who entered forbearance on or before June 30, 2020. FHA,
VA, and USDA also extended the foreclosure moratorium on government-
insured and guaranteed loans until June 30, 2021, from the previous
expiration date of March 31, 2021, and the GSEs announced a similar
extension on February 25, 2021.\43\ The government agencies also
announced an extension in the forbearance enrollment window until June
30, 2021, to provide additional time for borrowers to request a COVID-
19 forbearance. FHFA has not yet announced a deadline for borrowers
with mortgages backed by the GSEs to enroll in a COVID-19 forbearance
plan.
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\43\ Press Release, The White House, Fact Sheet: Biden
Administration Announces Extension of COVID-19 Forbearance and
Foreclosure Protections for Homeowners (Feb. 16, 2021), https://www.whitehouse.gov/briefing-room/statements-releases/2021/02/16/fact-sheet-biden-administration-announces-extension-of-covid-19-forbearance-and-foreclosure-protections-for-homeowners/. See also
Press Release, Fed. Hous. Fin. Agency, FHFA Extends COVID-19
Forbearance Period and Foreclosure and REO Eviction Moratoriums
(Feb. 25, 2021), https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Extends-COVID-19-Forbearance-Period-and-Foreclosure-and-REO-Eviction-Moratoriums.aspx.
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Following the passage of the CARES Act, some mortgage servicers
remain obligated to make some principal and interest payments to
investors in GSE and Ginnie Mae securities, even if consumers are not
making payments.\44\ Servicers also remain obligated to make escrowed
real estate tax and insurance payments to local taxing authorities and
insurance companies. While servicers are required to hold liquid
reserves to cover anticipated advances, early in the pandemic there
were significant concerns that higher-than-expected forbearance rates
over an extended period of time could lead to liquidity shortages,
particularly among many non-bank servicers. While forbearance rates
remain elevated at 4.66 percent for the week ending April 4, 2021, they
have decreased since reaching their high of 8.55 percent on June 7,
2020, as illustrated in Figure 2 below.\45\
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\44\ The GSEs typically repurchase loans out of the trust after
they fall 120 days delinquent, after which the servicer is no longer
required to advance principal and interest, but Ginnie Mae requires
servicers to advance principal and interest until the default is
resolved. On April 21, 2020, FHFA confirmed that servicers of GSE
loans will only be required to advance four months of mortgage
payments, regardless of whether the GSEs repurchase the loans from
the trust after 120 days of delinquency. Fed. Hous. Fin. Agency,
FHFA Addresses Servicer Liquidity Concerns, Announces Four Month
Advance Obligation Limit for Loans in Forbearance (Apr. 21, 2020),
https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Addresses-Servicer-Liquidity-Concerns-Announces-Four-Month-Advance-Obligation-Limit-for-Loans-in-Forbearance.aspx.
\45\ Press Release, Mortg. Bankers Ass'n, Share of Mortgage
Loans in Forbearance Decreases to 4.66% (April 12, 2021), https://www.mba.org/2021-press-releases/april/share-of-mortgage-loans-in-forbearance-decreases-to-466-percent.
[GRAPHIC] [TIFF OMITTED] TR30AP21.005
Because many mortgage servicers also originate the loans they
service, many creditors, as well as several warehouse providers,\46\
initially responded to the risk of elevated forbearances and higher-
than-expected monthly advances by imposing credit overlays--i.e.,
additional underwriting standards--for new originations. These new
underwriting standards included more stringent requirements for non-QM,
jumbo, and government loans.\47\ An
[[Page 22850]]
``adverse market fee'' of 50 basis points on most refinances became
effective for new originations delivered to the GSEs on or after
December 1, 2020, to cover projected losses due to forbearances, the
foreclosure moratoria, and other default servicing expenses.\48\
However, due to refinance origination profits resulting from
historically low interest rates, the leveling off in forbearance rates,
and actions taken at the Federal level to alleviate servicer liquidity
pressure,\49\ concerns over non-bank liquidity and related credit
overlays have eased, although Federal regulators continue to monitor
the situation.\50\ Nonetheless, access to credit for higher-risk but
creditworthy consumers remains an ongoing concern given continued
uncertainty over the impact of the expiration of foreclosure moratoria
and COVID-19 forbearance plans on the mortgage market as well as
creditor capacity constraints due to strong refinance demand.\51\
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\46\ Warehouse providers are creditors that provide financing to
mortgage originators and servicers to fund and service loans.
\47\ Maria Volkova, FHA/VA Lenders Raise Credit Score
Requirements, Inside Mortg. Fin. (Apr. 3, 2020), https://www.insidemortgagefinance.com/articles/217636-fhava-lenders-raise-fico-credit-score-requirements (on file).
\48\ Press Release, Fed. Hous. Fin. Agency, Adverse Market
Refinance Fee Implementation now December 1 (Aug. 25, 2020), https://www.fhfa.gov/Media/PublicAffairs/Pages/Adverse-Market-Refinance-Fee-Implementation-Now-December-1.aspx.
\49\ On April 10, 2020, Ginnie Mae released guidance on a Pass-
Through Assistance Program whereby Ginnie Mae will provide financial
assistance at a fixed interest rate to servicers facing a principal
and interest shortfall as a last resort. Ginnie Mae, All Participant
Memorandum (APM) 20-03: Availability of Pass-Through Assistance
Program for Participants in Ginnie Mae's Single-Family MBS Program
(Apr. 10, 2020), https://www.ginniemae.gov/issuers/program_guidelines/Pages/mbsguideapmslibdisppage.aspx?ParamID=105.
On April 7, 2020, Ginnie Mae also announced approval of a servicing
advance financing facility, whereby mortgage servicing rights are
securitized and sold to private investors. Press Release, Ginnie
Mae, Ginnie Mae approves private market servicer liquidity facility
(Apr. 7, 2020), https://www.ginniemae.gov/newsroom/Pages/PressReleaseDispPage.aspx?ParamID=194.
\50\ Fin. Stability Oversight Council, U.S. Dep't of the
Treasury, 2020 Annual Report, at 169 (2020), https://home.treasury.gov/system/files/261/FSOC2020AnnualReport.pdf.
\51\ Nat'l Mortg. News, Opinion: The originations feast and
credit famine (Oct. 4, 2020), https://www.nationalmortgagenews.com/opinion/the-originations-feast-and-credit-availability-famine (on
file). This final rule is separate from the Bureau's pending
proposal to amend certain provisions of Regulation X to assist
borrowers affected by the COVID-19 pandemic, which was published in
the Federal Register on April 9, 2021. Because the purpose of this
final rule complements the purpose of the Bureau's pending proposal,
the Bureau believes that it is appropriate to finalize this rule
regardless of how it proceeds with the its pending proposal.
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III. Legal Authority
The Bureau is issuing this final rule to amend Regulation Z
pursuant to its authority under TILA and the Dodd-Frank Act. Section
1061 of the Dodd-Frank Act transferred to the Bureau the ``consumer
financial protection functions'' previously vested in certain other
Federal agencies, including the Board. The Dodd-Frank Act defines the
term ``consumer financial protection function'' to include ``all
authority to prescribe rules or issue orders or guidelines pursuant to
any Federal consumer financial law, including performing appropriate
functions to promulgate and review such rules, orders, and
guidelines.'' \52\ Title X of the Dodd-Frank Act (including section
1061), along with TILA and certain subtitles and provisions of title
XIV of the Dodd-Frank Act, are Federal consumer financial laws.\53\
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\52\ 12 U.S.C. 5581(a)(1)(A).
\53\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14)
(defining ``Federal consumer financial law'' to include the
``enumerated consumer laws'' and the provisions of title X of the
Dodd-Frank Act), Dodd-Frank Act section 1002(12)(O), 12 U.S.C.
5481(12)(O) (defining ``enumerated consumer laws'' to include TILA).
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A. TILA
TILA section 105(a). Section 105(a) of TILA directs the Bureau to
prescribe regulations to carry out the purposes of TILA and states that
such regulations may contain such additional requirements,
classifications, differentiations, or other provisions and may further
provide for such adjustments and exceptions for all or any class of
transactions that the Bureau judges are necessary or proper to
effectuate the purposes of TILA, to prevent circumvention or evasion
thereof, or to facilitate compliance therewith.\54\ A purpose of TILA
is ``to assure a meaningful disclosure of credit terms so that the
consumer will be able to compare more readily the various credit terms
available to him and avoid the uninformed use of credit.'' \55\
Additionally, a purpose of TILA sections 129B and 129C is to assure
that consumers are offered and receive residential mortgage loans on
terms that reasonably reflect their ability to repay the loans and that
are understandable and not unfair, deceptive, or abusive.\56\ The
Bureau is issuing this final rule pursuant to its rulemaking,
adjustment, and exception authority under TILA section 105(a).
---------------------------------------------------------------------------
\54\ 15 U.S.C. 1604(a).
\55\ 15 U.S.C. 1601(a).
\56\ 15 U.S.C. 1639b(a)(2).
---------------------------------------------------------------------------
TILA section 129C(b)(2)(A). TILA section 129C(b)(2)(A)(vi) provides
the Bureau with authority to establish guidelines or regulations
relating to ratios of total monthly debt to monthly income or
alternative measures of ability to pay regular expenses after payment
of total monthly debt, taking into account the income levels of the
borrower and such other factors as the Bureau may determine relevant
and consistent with the purposes described in TILA section
129C(b)(3)(B)(i).\57\ The Bureau is issuing this final rule pursuant to
its authority under TILA section 129C(b)(2)(A)(vi).
---------------------------------------------------------------------------
\57\ 15 U.S.C. 1639c(b)(2)(A).
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TILA section 129C(b)(3)(A), (B)(i). TILA section 129C(b)(3)(B)(i)
authorizes the Bureau to prescribe regulations that revise, add to, or
subtract from the criteria that define a QM upon a finding that such
regulations are necessary or proper to ensure that responsible,
affordable mortgage credit remains available to consumers in a manner
consistent with the purposes of TILA section 129C; or are necessary and
appropriate to effectuate the purposes of TILA sections 129B and 129C,
to prevent circumvention or evasion thereof, or to facilitate
compliance with such sections.\58\ In addition, TILA section
129C(b)(3)(A) directs the Bureau to prescribe regulations to carry out
the purposes of section 129C.\59\ The Bureau is issuing this final rule
pursuant to its authority under TILA section 129C(b)(3)(B)(i).
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\58\ 15 U.S.C. 1639c(b)(3)(B)(i).
\59\ 15 U.S.C. 1639c(b)(3)(A).
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B. Dodd-Frank Act
Dodd-Frank Act section 1022(b). Section 1022(b)(1) of the Dodd-
Frank Act authorizes the Bureau to prescribe rules to enable the Bureau
to administer and carry out the purposes and objectives of the Federal
consumer financial laws, and to prevent evasions thereof.\60\ TILA and
title X of the Dodd-Frank Act are Federal consumer financial laws.
Accordingly, the Bureau is exercising its authority under Dodd-Frank
Act section 1022(b) to prescribe rules that carry out the purposes and
objectives of TILA and title X and prevent evasion of those laws.
---------------------------------------------------------------------------
\60\ 12 U.S.C. 5512(b)(1).
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IV. Section-by-Section Analysis
1026.43 Minimum Standards for Transactions Secured by a Dwelling
The General QM Final Rule established a March 1, 2021 effective
date and a July 1, 2021 mandatory compliance date. Comment 43-2
explains that, for transactions for which a creditor received the
consumer's application on or after March 1, 2021, but prior to July 1,
2021, creditors seeking to originate General QMs have the option of
complying with either the revised, price-based General QM loan
definition or the original, DTI-based General QM loan definition. This
comment also explains that, for
[[Page 22851]]
transactions for which a creditor received the consumer's application
on or after July 1, 2021, creditors seeking to originate General QMs
must use the revised, price-based General QM loan definition.
Additionally, under the Patch Extension Final Rule, the Temporary
GSE QM loan definition expires upon the earlier of the General QM Final
Rule's mandatory compliance date or the date the applicable GSE ceases
to operate under conservatorship. Therefore, under the mandatory
compliance date established by the General QM Final Rule, creditors
seeking to originate QMs had the additional option of complying with
the Temporary GSE QM loan definition, but only if the application for
the covered transaction was received before either July 1, 2021, or the
date the applicable GSE ceased to operate under conservatorship,
whichever came first.
This final rule delays the General QM Final Rule's mandatory
compliance date from July 1, 2021 to October 1, 2022, as the Bureau
proposed. Specifically, the final rule amends comments 43-2 and
43(e)(4)-2 and -3 to reflect a delay of the mandatory compliance date
by changing the date ``July 1, 2021'' where it appears in those
comments to ``October 1, 2022.'' The Bureau is also adding comment
43(e)(2)-1 to clarify that both the original, DTI-based General QM loan
definition and the revised, price-based General QM loan definition are
available to creditors for transactions for which a creditor received
an application on or after March 1, 2021, but prior to October 1, 2022.
The specific amendments to the commentary are the same as the
amendments the Bureau proposed. The Bureau is also correcting a
typographical error in comment 43(e)(4)-2 by replacing ``thorough''
with ``through.''
With these changes, creditors seeking to originate General QMs will
have the option of complying with either the revised, price-based
General QM loan definition or the original, DTI-based General QM loan
definition for transactions for which a creditor received the
consumer's application on or after March 1, 2021, but prior to October
1, 2022. For transactions for which a creditor received the consumer's
application on or after October 1, 2022, creditors seeking to originate
General QMs will have to use the revised, price-based General QM loan
definition. Additionally--because the Temporary GSE QM loan definition
expires on the mandatory compliance date of the General QM Final Rule
or the date the applicable GSE ceases to operate under conservatorship,
whichever comes first--creditors seeking to originate QMs will have the
additional option of complying with the Temporary GSE QM loan
definition, if the application for the covered transaction was received
before either October 1, 2022, or the date the applicable GSE ceases to
operate under conservatorship, whichever comes first. The Bureau
recognizes that the practical availability of the Temporary GSE QM loan
definition may be affected by policies or agreements created by parties
other than the Bureau, such as the Preferred Stock Purchase Agreements
(PSPAs), which include restrictions on GSE purchases that rely on the
Temporary GSE QM loan definition after July 1, 2021.\61\
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\61\ On January 14, 2021, the U.S. Department of the Treasury
and FHFA amended the terms of the PSPAs for Fannie Mae and Freddie
Mac. Section 5.14(c) was added to the agreement and limits the GSEs'
acquisition of certain loans on or after July 1, 2021, including
loans that are not qualified mortgages as defined by 12 CFR
1026.43(e)(2), (5), (6), (7) or (f) with certain exceptions. See
Letter of Treasury Secretary Steven T. Mnuchin to FHFA Director Mark
Calabria (Jan. 14, 2021), https://home.treasury.gov/system/files/136/Executed-Letter-Agreement-for-Fannie-Mae.pdf.
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Reasons for Delaying the Mandatory Compliance Date to October 1, 2022
The Bureau is issuing this final rule because it has concluded that
maintaining the July 1, 2021 mandatory compliance date may leave some
struggling homeowners with fewer options by reducing the flexibility of
creditors to respond to the effects of the pandemic. In the Patch
Extension Final Rule and the General QM Final Rule, the Bureau noted
the disruptive effects of the pandemic on the mortgage market but
nevertheless concluded that these effects did not justify the adoption
of a mandatory compliance date later than July 1, 2021. Upon further
evaluation, the Bureau has concluded that it may not have given
sufficient weight to the potential risk that mandating the transition
to the price-based approach in the revised General QM loan definition
on July 1, 2021 could restrict options for consumers struggling with
the disruptive effects of the pandemic. The Bureau has concluded that
preserving flexibility to respond to the effects of the pandemic, by
delaying the mandatory compliance date until October 1, 2022, outweighs
concerns that a delay of the mandatory compliance date could stifle the
development of private-sector approaches to underwriting or a rebound
of the non-GSE private market in the near term.
The Bureau also concludes that the adverse impact of the pandemic
on mortgage markets may persist longer than anticipated at the time of
publication of the General QM Final Rule. In particular, as discussed
in more detail below, with the extension of certain forbearance
programs and foreclosure moratoria, the Bureau has concluded that the
potential for disruption in the mortgage market will persist well past
July 2021.
The Bureau notes that this rulemaking does not reconsider the
revised, price-based General QM loan definition that was adopted in the
General QM Final Rule. This definition went into effect on March 1,
2021, and creditors have the option of using it to originate QMs.
Rather, this final rule concludes that it would be appropriate in light
of the continuing disruptive effects of the pandemic to help facilitate
greater creditor flexibility and expanded availability of responsible,
affordable credit options for some struggling consumers by also
providing QM status to loans originated under the original, DTI-based
General QM loan definition and, potentially, under the Temporary GSE QM
loan definition until October 1, 2022.
The Bureau is issuing this final rule due to concerns that
requiring creditors seeking to make QM loans to shift to the revised,
price-based General QM loan definition could reduce access to credit,
particularly for certain consumer segments. As discussed in detail in
part IV of the proposal, the Bureau has two concerns related to access
to responsible, affordable mortgage credit.
First, as discussed in the proposal, the Bureau believes that
ongoing regulatory interventions to assist consumers who may have
suffered an income disruption related to the pandemic--such as COVID-19
forbearance plans and foreclosure moratoria--and potential disruptions
in the market when those interventions expire warrant a delay of the
mandatory compliance date.\62\ The Bureau is concerned that the impact
of the eventual expiration of foreclosure moratoria and COVID-19
forbearance plans described in part II.D above has the potential to
lead to additional disruptions in the mortgage markets. The Bureau has
concluded that it may not have given sufficient weight to these issues
in mandating that creditors comply with the price-based approach on
July 1, 2021. In addition, the Bureau has concluded that the extension
of certain forbearance programs and foreclosure moratoria may result in
these effects continuing longer than the Bureau anticipated at the time
of the General QM Final Rule, and the Bureau
[[Page 22852]]
concludes that delaying the mandatory compliance date of the General QM
Final Rule to October 1, 2022 will provide additional flexibility to
creditors originating QM loans.
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\62\ 86 FR 12839, 12848-50 (Mar. 5, 2021).
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Second, as discussed in the proposal, the Bureau has concerns about
mortgage credit availability for some creditworthy consumers who would
qualify for a mortgage but for the disruptive market effects of the
pandemic, and believes that such concerns warrant a delay of the
mandatory compliance date.\63\ The Bureau seeks to avoid a reduction in
credit access for certain consumers who have been unable to purchase or
refinance due to the effects of the pandemic on the origination market.
As described in the proposal, the Bureau is concerned that, despite the
record origination volumes, access to low interest-rate refinances and
purchase mortgages in these unique circumstances may be less widely
available for consumers with weaker credit relative to consumers with
stronger credit in part due to creditor capacity constraints as opposed
to the standard risk-based pricing adjustments that creditors typically
charge. The Bureau is finalizing this proposal because it is concerned
that requiring creditors to transition to the revised, price-based
General QM loan definition on July 1, 2021--and eliminating the
Temporary GSE QM loan definition and the original, DTI-based General QM
loan definition at that time--will exacerbate these credit-access
concerns.
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\63\ Id. at 12850-53.
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For the reasons described above, the Bureau is finalizing the
proposed revisions to the commentary. The mandatory compliance date for
the General QM Final Rule is October 1, 2022. For covered transactions
for which creditors receive an application on or after the March 1,
2021 effective date and before the October 1, 2022 mandatory compliance
date, creditors have the option of complying with either the revised,
price-based General QM loan definition or the original, DTI-based
General QM loan definition. Additionally--because the Temporary GSE QM
loan definition expires on the mandatory compliance date of the General
QM Final Rule or the date the applicable GSE ceases to operate under
conservatorship, whichever comes first--creditors seeking to originate
QMs will have the additional option of complying with the Temporary GSE
QM loan definition, if the application for the covered transaction was
received before either October 1, 2022 or the date the applicable GSE
ceases to operate under conservatorship, whichever comes first.\64\
This final rule will be effective on June 30, 2021.
---------------------------------------------------------------------------
\64\ As noted above, however, the availability of the Temporary
GSE QM loan definition may be affected by policies or agreements
created by parties other than the Bureau, such as the PSPAs, which
include restrictions on GSE purchases that rely on the Temporary GSE
loan QM definition after July 1, 2021. See supra note 61 and
accompanying text.
---------------------------------------------------------------------------
Comments and Responses
The Bureau received 24 unique comments on the proposal. The Bureau
summarizes and responds to these comments below.
Comments on the Bureau's reasons for delaying the compliance date.
The Bureau received many comments on the reasons that it described in
the proposal for delaying the mandatory compliance date, which are
related to the impact of the COVID-19 pandemic on the mortgage market.
Commenters varied in their views as to whether delaying the mandatory
compliance date would have the desired effect of mitigating the
pandemic-related disruptions identified in the proposal.
Nearly all commenters agreed with the Bureau's concerns that
pandemic-related disruptions have significantly impacted the mortgage
market, and several commenters agreed that delaying the mandatory
compliance date to October 1, 2022 would help ensure access to
responsible, affordable mortgage credit and preserve flexibility for
consumers affected by the COVID-19 pandemic and its economic effects,
as the Bureau stated in the proposal. One industry commenter stated
that the proposed delay of the mandatory compliance date would prove
especially helpful to small institutions such as community banks in
providing access to credit, as they may not be ready to comply with the
revised, price-based General QM loan definition by July 1, 2021. This
commenter also stated that the Temporary GSE QM loan definition, in
particular, has played an important role in providing access to credit
for minority, younger, millennial, non-W-2, and low-income consumers.
Another industry commenter suggested that the Bureau delay the
mandatory compliance date for as long as possible. The commenter
recommended that, if the Bureau delays the mandatory compliance date to
October 1, 2022, the Bureau set up a future review to ensure the
sufficiency of that date.
Another industry commenter stated that the additional flexibility
afforded to credit unions by a delay of the mandatory compliance date
will assist consumers who may not have otherwise been able to obtain a
mortgage under the revised, price-based General QM loan definition due
to the current lending environment and impacts of the pandemic. This
commenter stated that it agreed with the Bureau that delaying the
mandatory compliance date would disincentivize the mispricing of loans
for higher-risk borrowers that the comment stated is occurring as a
result of pandemic-related market conditions, such as the high volume
of mortgage originations as the proposal discussed.
A coalition of consumer advocates stated that delaying the
mandatory compliance date would give creditors the flexibility to
provide credit and allow servicers to focus on assisting consumers with
post-forbearance options. The commenter stated that, with relatively
high unemployment rates and 2.5 million consumers in active forbearance
plans, the industry and the Bureau should remain focused on resolving
forbearance plans to minimize unnecessary foreclosures. The commenters
added that, given the resources necessary to move these borrowers into
a post-forbearance accommodation, allowing the continued use of
multiple QM definitions will mitigate the extent to which disruptions
in the servicing market affect the origination market. An industry
commenter stated that servicers are currently focused on assisting the
unprecedented number of borrowers exiting forbearance, noting that the
reperformance of loans currently in forbearance is of critical
importance to overall market stability. This commenter also stated that
the current economic conditions do not create an environment conducive
to the implementation of major regulatory changes. These commenters and
another industry commenter stated generally that the flexibility
afforded to creditors by keeping multiple QM definitions available is
warranted given the uncertain trajectory of the United States' economic
recovery from the pandemic.
One industry commenter stated that recent market trends related to
the pandemic necessitate additional time for implementation beyond the
time that is typically needed. Specifically, the commenter stated that
the early-2021 increase in mortgage interest rates may cause a decline
in profits as creditors are required to simultaneously implement many
post-forbearance loss mitigation and resolution requirements as
forbearance plans come to an end. This commenter also stated that the
GSEs are preparing to implement new capital standards that are
estimated to increase mortgage rates and that the Bureau should study
the impact on pricing, consumers, and the market as
[[Page 22853]]
well as allow creditors time to adapt to the multiple challenges
presented.
Many commenters opposed the Bureau's proposal to delay the
mandatory compliance date and stated that the proposed delay would not
result in the credit-access benefits cited by the Bureau. Several
industry commenters stated that loans that obtain QM status through the
revised, price-based General QM loan definition overlap significantly
with loans that obtained QM status through the Temporary GSE QM loan
definition and the original, DTI-based General QM loan definition. They
stated that, as a result, the impact on access to credit of delaying
the mandatory compliance date would be minimal at best. While these
commenters acknowledged the economic stress the pandemic has placed on
the industry and on consumers, they argued that the Bureau has not
identified a sufficient basis to conclude that delaying the mandatory
compliance date would mitigate these disruptions. These commenters
asserted that the proposal did not provide data or analysis
demonstrating the need for the Temporary GSE QM loan definition and the
original, DTI-based General QM loan definition for an extended period
of time, given the expansive nature of the revised, price-based General
QM loan definition. These commenters also stated that recent purchase
restrictions in the PSPAs for Fannie Mae and Freddie Mac will limit the
effects of a delay of the mandatory compliance date, as discussed
further below. A coalition comprised primarily of consumer advocates
stated that despite their belief that extending the Temporary GSE QM
loan definition through an extension of the mandatory compliance date
is not necessary, they also believe that such an extension will do no
harm.
Several industry commenters asserted that the Bureau failed to
identify a clear nexus between the consumers who would be affected by
the pandemic and those who could specifically benefit from the
original, DTI-based General QM loan definition. One commenter stated
that few loans with DTI ratios below 43 percent would be priced with an
interest rate spread more than 2.25 percentage points above APOR. This
commenter also stated that the burden of complying with appendix Q can
have an adverse impact on access to credit. This commenter also stated
that borrowers most likely to have been impacted by the pandemic
include those who suffered an income disruption or increased debt
loads, and that the Bureau had not explained how those particular
borrowers are likely to benefit from the original, DTI-based General QM
loan definition, which requires substantial income documentation.
While no commenters disputed that the pandemic has disrupted the
mortgage industry, some commenters disagreed with the Bureau's
explanations of how delaying the mandatory compliance date would
address the two types of market problems it identified in the proposal.
With regard to the first issue identified in the proposal--the upcoming
expiration of forbearance plans and foreclosure moratoria--one industry
commenter stated that the GSEs and government agencies are offering
streamlined post-forbearance loss mitigation options that should assist
families in keeping their homes and that high levels of home equity
should make it possible for many consumers who seek to sell their homes
to do so, which would mitigate the need for a delay in the mandatory
compliance date. Another industry commenter stated that delaying the
mandatory compliance date is unlikely to materially increase access to
credit and also noted that the supply of available homes falls far
short of purchaser demand, and therefore they expect no shortage of
qualified borrowers.
With regard to the second issue identified in the proposal relating
to access to credit--the availability of mortgage credit for some
creditworthy consumers who would qualify for a mortgage but for the
disruptive market effects of the pandemic--one commenter acknowledged
the supporting data the Bureau put forward in the proposal but noted
the proposal lacked quantitative data specifically related to creditor
capacity constraints and credit overlays. This commenter reiterated
that even if these capacity constraints and overlays are substantiated,
the Bureau has not provided evidence that a delay of the mandatory
compliance date would mitigate these identified concerns. A separate
industry commenter stated that industry-wide adoption of the revised,
price-based General QM loan definition may actually make the market
more efficient, alleviating some of the pandemic-related capacity
constraints that some creditors are facing and that the Bureau
identified in the proposed rule. This commenter asserted that the
revised, price-based General QM loan definition should provide ample
access to credit for creditworthy consumers during the pandemic
recovery.
Many industry and consumer advocate commenters addressed the impact
of recent amendments to the PSPAs on the proposed rationale for
delaying the mandatory compliance date. Commenters stated that these
amendments may prevent the GSEs from purchasing loans based on the
Temporary GSE QM loan definition after July 1, 2021, and therefore may
significantly limit the impact of the mandatory compliance date delay,
absent revisions to the agreements.\65\
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\65\ On January 14, 2021, the U.S. Department of the Treasury
and FHFA amended the terms of the PSPAs for Fannie Mae and Freddie
Mac. Section 5.14(c) was added to the agreement and limits the GSEs'
acquisition of certain loans on or after July 1, 2021, including
loans that are not qualified mortgages as defined by 12 CFR
1026.43(e)(2), (5), (6), (7) or (f) with certain exceptions.
---------------------------------------------------------------------------
Many industry and consumer advocate commenters that supported
delaying the mandatory compliance date suggested that the Bureau also
advocate for a change to the PSPAs that would allow for the purchase of
Temporary GSE QM loans during the proposed delay of the mandatory
compliance date. They stated that loans originated under the Temporary
GSE QM loan definition are crucial to maintaining market stability and
access to credit for certain segments of the market, such as minorities
and low- to moderate-income consumers. One industry commenter suggested
that credit unions, in particular, rely on the Temporary GSE QM loan
definition to lend in their communities and stated that their internal
industry survey data suggest that 61 percent of their outstanding
mortgages qualified to be sold to the GSEs and that 19 percent of
survey respondents indicated that the expiration of the Temporary GSE
QM loan definition would have a material impact on their credit
union.\66\
---------------------------------------------------------------------------
\66\ The comment did not provide a copy of or citation to the
survey described.
---------------------------------------------------------------------------
Several industry commenters that opposed delaying the mandatory
compliance date stated that certain ways in which the Bureau stated the
delay would address market disruptions, such as by providing the GSEs
with the flexibility to tailor programs to meet challenges specific to
the COVID-19 pandemic, may be thwarted by restrictions on Temporary GSE
QM loans in the PSPAs. Moreover, they stated that the existing language
in the PSPAs would not constrict access to credit, as most loans
covered by the Temporary GSE QM loan definition would also be covered
by the revised, price-based General QM loan definition. One industry
commenter also argued that a delay in the mandatory compliance date
would not provide additional implementation time because, in light of
the PSPAs, creditors
[[Page 22854]]
would likely need to comply with the revised, price-based General QM
loan definition in order to sell their loans to the GSEs as of July 1,
2021.
A few industry commenters noted that additional provisions were
included in the PSPAs that restrict access to credit such as certain
limitations on the purchases of second homes, investor properties, and
higher-risk single-family loans. Specifically, these commenters cited
the PSPA limitation on the acquisitions of loans with two out of three
high-risk characteristics, defined as a loan-to-value ratio (LTV) of 90
percent or greater, a DTI of 45 percent or greater, and a credit score
of 680 or less. These commenters were concerned that such limitations
would impair access to credit and noted that a quick implementation of
the revised, price-based General QM loan definition may mitigate some
of these impacts.
Response. The Bureau is finalizing the proposed rule to delay the
mandatory compliance date until October 1, 2022 because it has
concluded that delaying the mandatory compliance date until that date
will help ensure access to responsible, affordable mortgage credit and
will help preserve flexibility for consumers affected by the COVID-19
pandemic and its economic effects. While the Bureau acknowledges that
future access-to-credit impacts of this delay are subject to
uncertainty, providing additional options to originate loans with
multiple pathways to QM status will increase flexibility for creditors
and secondary market participants to serve emerging market needs and
will help increase access to mortgage credit for consumers during a
period of significant economic stress. With respect to the commenter
recommendation to set up a future review of the delayed mandatory
compliance date, the Bureau will continue to monitor for any
unanticipated effects of the COVID-19 pandemic on market conditions to
determine if future changes are warranted.
The Bureau has concluded that delaying the mandatory compliance
date will expand access to credit and allow industry participants to
focus on offering struggling consumers post-forbearance options. No
commenters disputed the disruptive impact of the pandemic on the
mortgage industry. In the proposed rule, the Bureau focused its
analysis on the impact of expanded access to credit on facilitating
interest rate-reducing refinances as well as allowing creditworthy
purchasers to absorb some of the distressed properties that may enter
the market due to the inability of the seller to maintain a post-
forbearance payment. But as noted above, several industry and consumer
advocate commenters stated that allowing creditors more time to
implement the revised, price-based General QM loan definition will
allow servicers to focus their efforts on keeping struggling consumers
in their homes, which will likely reduce the number of distressed
properties that enter the market. The Bureau determines that this
rationale provided by commenters is an additional, although not
necessary, reason to delay the mandatory compliance date to October 1,
2022. The Bureau has concluded that, given the significant uncertainty
in the mortgage market with regard to the effects of forbearance plans
and foreclosure moratoria expiring, delaying the mandatory compliance
date will provide both servicers and creditors with the flexibility to
use multiple QM definitions and reallocate resources between
origination and servicing departments to best assist consumers. The
Bureau believes this may reduce some operational capacity constraints
in the servicing market, although the Bureau expects servicer
operational capacity constraints to continue at least through the end
of this year.
The Bureau further concludes that the pandemic has had the effect
of restricting access to credit for higher-risk, yet creditworthy
consumers and that delaying the mandatory compliance date may ease
these credit-access concerns by providing multiple pathways to QM
status. The Bureau notes that, with the exception of one industry
commenter,\67\ commenters did not question the Bureau's findings that
access to credit has been constrained for higher-risk, yet creditworthy
borrowers due to creditor capacity limitations and creditor precautions
intended to ensure that new originations are less likely to request a
COVID-19 forbearance in the future. Several industry commenters agreed
with the proposal's analysis of this issue. The Bureau acknowledges
that, given the continually evolving nature of both the pandemic's
impact on the mortgage market and responses by regulators, there is
uncertainty as to the extent to which delaying the mandatory compliance
date will increase access to credit. However, the Bureau concludes
that, to some extent, the additional flexibility provided by this final
rule will increase--rather than decrease--access to credit.
---------------------------------------------------------------------------
\67\ This industry commenter did not challenge the Bureau's
findings that access to credit has been restricted for higher-risk
consumers, but asserted that the Bureau did not provide quantitative
data in support of creditor capacity constraints.
---------------------------------------------------------------------------
Moreover, the Bureau is concerned that temporarily, non-agency
market constraints created by the pandemic could make it more difficult
for some creditworthy borrowers with the ability to repay mortgage
loans that currently qualify for QM status under the original, DTI-
based General QM loan definition to obtain such loans if those loans no
longer qualify for QM status based on the revised, price-based General
QM loan definition. For example, as discussed in the section 1022(b)
analysis in part V, of the 33,000 additional consumers expected to
obtain conventional QM loans priced 2.25 percentage points or higher
above APOR due to this rule, 28,000 are expected to obtain QM status
through the original, DTI-based General QM loan definition. The Bureau
estimates that the continued availability of the original, DTI-based
General QM loan definition and, potentially, the Temporary GSE QM loan
definition each separately provide beneficial access to credit under
this final rule. As a result, even if the PSPAs continue to restrict
GSE purchases that rely on the Temporary GSE loan QM definition after
July 1, 2021, as some commenters noted, the Bureau concludes that the
final rule will increase access to mortgage credit relative to the
current rule under which the original, DTI-based General QM loan
definition would no longer be available starting July 1, 2021. The
benefits from leaving the Temporary GSE QM loan definition in place
until October 1, 2022 and the benefits from creditors using the
original, DTI-based General QM loan definition during that period are,
in the Bureau's view, each independently sufficient reasons for
delaying the mandatory compliance date.
As the proposal stated, while the Bureau acknowledges that
policies, agreements, or legislation created by parties other than the
Bureau--including the PSPAs--may limit the impact of the mandatory
compliance date delay, the Bureau is unable to predict how such
agreements or restrictions might change in the future. The Bureau also
notes that sections 5.14(c)(iii)-(vi) of the letter agreements amending
the PSPAs appear to provide FHFA with the authority to allow the GSEs
to purchase certain loans that do not comply with the QM definitions
listed in section 5.14(c)(i).\68\ These include loans secured by
investment
[[Page 22855]]
properties, high-LTV streamlined refinances, and single family loans
secured by manufactured housing. The letter agreements also appear to
provide broad authority for FHFA and the GSEs to establish temporary
underwriting flexibilities during times of exigent circumstances. While
the agreement appears to provide FHFA discretion to determine whether
it will allow the GSEs to exercise these additional purchase
flexibilities, issuing this final rule to delay the mandatory
compliance date will confer QM status to these loans if FHFA decides it
is necessary to exercise this authority. QM status may prove valuable
in the future given the uncertain market outlook as a result of the
COVID-19 pandemic. Absent this final rule, if FHFA and the GSEs
exercised this authority, it would permit the GSEs to purchase certain
non-QM loans. The Temporary GSE QM loan definition confers QM status on
loans eligible for sale to the GSEs. Therefore, finalizing this rule
will allow FHFA to exercise this authority for the GSEs and other
secondary market participants to instead purchase these loans with QM
status, which may increase access to credit through lower pricing and
greater secondary market liquidity.
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\68\ Section 5.14(c)(i) limits GSE loan purchases after July 1,
2021 to loans that satisfy the General QM loan definition, Small
Creditor QM loan definition, Seasoned QM loan definition, or Balloon
Payment QM loan definition.
---------------------------------------------------------------------------
Comments on uncertainty about the General QM loan definition.
Several industry commenters stated that the proposal has created
uncertainty with respect to whether the Bureau will permit the revised,
price-based General QM loan definition to remain in effect. For
example, several industry commenters stated that the Bureau's primary
purpose in delaying the mandatory compliance date is to facilitate
reconsideration of the General QM loan definition. Several commenters
stated that the Bureau's February 23, 2021 Statement \69\ has
contributed to this uncertainty.
---------------------------------------------------------------------------
\69\ See supra part II.B.
---------------------------------------------------------------------------
Commenters also stated that this uncertainty may deter creditors
and vendors from continuing to invest in the resources and training
necessary to implement the revised, price-based General QM loan
definition. One commenter stated that this uncertainty will likely
result in market participants experiencing compliance challenges that
may divert resources away from other needs, in particular from
responding to borrower requests for assistance due to hardships
experienced under the COVID-19 pandemic, until there is assurance that
the Bureau will permit the revised, price-based General QM loan
definition to remain in effect. Industry commenters also asserted that
delays in implementing the price-based approach could negatively affect
access to credit; for example, they suggested that it could inhibit
innovative underwriting approaches that, in the view of these
commenters, would benefit minority borrowers in particular.
Response. The Bureau understands that some industry uncertainty has
resulted from the Bureau's Statement providing transparency about its
plans to consider at a later date whether to reconsider other aspects
of the General QM Final Rule, as well as from the Bureau's reiteration
in the proposal of the applicable language from the Statement. However,
this final rule concerns the delay of the mandatory compliance date
from July 1, 2021 to October 1, 2022. Commenters did not explain why
delaying the mandatory compliance date to October 1, 2022, in and of
itself, would meaningfully increase uncertainty in the market about
whether the Bureau will reconsider other aspects of the General QM
Final Rule, and the Bureau does not believe that delaying the mandatory
compliance date to October 1, 2022 would have this effect.
The Bureau also notes that, while many industry commenters stated
that uncertainty about potential reconsideration of the revised, price-
based General QM loan definition will deter creditors from implementing
the revised General QM loan definition (and therefore mitigate benefits
from that final rule), commenters did not identify examples of this
occurring in the market. In contrast, the Bureau understands that
several larger creditors have already implemented the revised, priced-
based General QM loan definition and announced new products that are
underwritten in accordance with the revised definition that went into
effect on March 1, 2021.\70\ Even if uncertainty results in some
creditors choosing to delay implementation of the revised, price-based
General QM loan definition, and even if that result could be attributed
to the rule, the Bureau concludes that such delays are unlikely to
result in significant limitations on access to responsible, affordable
mortgage credit under the price-based approach and do not outweigh the
potential credit-access benefits of delaying the mandatory compliance
date.
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\70\ See, e.g., Brandon Ivey, Some Non-Agency Lenders Embracing
New QM Rule, Inside Mortg. Fin. (Mar. 26, 2021), https://www.insidemortgagefinance.com/articles/220914-some-non-agency-lenders-embracing-cfpbs-qm-changes.
---------------------------------------------------------------------------
Comments on general implementation issues. Several industry
commenters stated that they supported the Bureau's proposal to delay
the mandatory compliance date because the delay would give them more
time to prepare to comply with the revised, priced-based General QM
loan definition. In contrast, one industry commenter stated that
delaying the mandatory compliance date would disrupt market
participants' efforts to bring their systems into compliance with the
price-based approach and cause market participants to incur additional
compliance-related costs for training, Loan Origination System
adjustments, secondary market integrations, and amendments to policies
and procedures. Other industry commenters stated that delaying the
mandatory compliance date was not necessary because many creditors have
already implemented the price-based approach and several others have
made preparations to implement it by the original mandatory compliance
date of July 1, 2021. One commenter stated that creditors and vendors
have slowed or paused implementation efforts in anticipation of the
Bureau's decision to delay the mandatory compliance date and urged the
Bureau to issue a final rule to restore certainty to the market and
allow all market participants time to adapt. One industry commenter
requested that the Bureau clarify whether creditors may use either the
original, DTI-based General QM loan definition or the revised, price-
based General QM loan definition on a loan-by-loan basis prior to the
mandatory compliance date, or whether they must use one definition or
the other for all their loans.
Response. Regarding the comment that delaying the mandatory
compliance date would disrupt market participants' efforts to bring
their systems into compliance with the price-based approach and impose
additional compliance-related costs, the Bureau notes that, with or
without this final rule, creditors that wish to originate General QM
loans must implement the revised, price-based General QM loan
definition before October 1, 2022 and thus face the same compliance
requirements. In addition, the Bureau reiterates that the purpose of
this final rule is to preserve flexibility by allowing creditors to
continue to use the original, DTI-based General QM loan definition and
the Temporary GSE QM loan definition until October 1, 2022.
Accordingly, creditors that wish to use the revised, price-based
General QM loan definition exclusively by July 1, 2021, as was
originally required under the General QM Final Rule, may still do so
and avoid any additional compliance-related costs associated
[[Page 22856]]
with the flexibility provided by this final rule. As many commenters
noted, delaying the compliance date will simply provide market
participants with more time to bring their systems into compliance with
the revised, price-based General QM loan definition.
With respect to the comment stating that delaying the mandatory
compliance date is not necessary because many creditors have already
implemented the revised, price-based General QM loan definition and
several others are prepared to implement it by the original mandatory
compliance date, the Bureau notes that these creditors will not be
harmed by delaying the mandatory compliance date. Moreover, as
discussed above under ``Comments on the Bureau's Reasons for Delaying
the Mandatory Compliance Date,'' some commenters have reported that
creditors have experienced challenges implementing the revised, price-
based General QM loan definition because of resource constraints due to
the recent forebearance plan and foreclosure moratoria extensions and
the need to find sustainable post-forebearance alternatives to keep
consumers in their homes. As noted above, the Bureau concludes that
these challenges identified by these commenters provide an additional,
although not necessary, reason for delaying the mandatory compliance
date.
Regarding the comment asking the Bureau to clarify that the
original, DTI-based General QM loan definition and the revised, priced-
based General QM loan definition are available on a loan-by-loan basis,
the Bureau notes that, as new comment 43(e)(2)-1 states, both the
original, DTI-based General QM loan definition and the revised, price-
based General QM loan definition are available to creditors for
transactions for which the creditor receives an application on or after
March 1, 2021, but prior to October 1, 2022.
Finally, the Bureau received many comments about the merits of the
General QM loan definition and the Seasoned QM loan definition. The
purpose of this rulemaking is not to address the merits of the General
QM loan definition or the Seasoned QM loan definition. These comments
are therefore outside the scope of this rulemaking. As the Bureau
stated in the Statement and states in this final rule, the Bureau will
consider at a later date whether to initiate a rulemaking to revisit
others aspects of the General QM loan definition and the Seasoned QM
loan definition.
V. Dodd-Frank Act Section 1022(b) Analysis
A. Overview
As discussed above, this final rule will delay the mandatory
compliance date of the General QM loan definition from July 1, 2021 to
October 1, 2022. In developing this final rule, the Bureau has
considered the potential benefits, costs, and impacts as required by
section 1022(b)(2)(A) of the Dodd-Frank Act. Specifically, section
1022(b)(2)(A) of the Dodd-Frank Act calls for the Bureau to consider
the potential benefits and costs of a regulation to consumers and
covered persons, including the potential reduction of access by
consumers to consumer financial products or services, the impact on
depository institutions and credit unions with $10 billion or less in
total assets as described in section 1026 of the Dodd-Frank Act, and
the impact on consumers in rural areas. The Bureau consulted with the
prudential regulators and other appropriate Federal agencies regarding
the consistency of the final rule with prudential, market, or systemic
objectives administered by such agencies as required by section
1022(b)(2)(B) of the Dodd-Frank Act.
B. Data and Evidence
The discussion in this impact analysis relies on data from a range
of sources. These include data collected or developed by the Bureau,
including HMDA \71\ data, as well as other publicly available sources.
In particular, as indicated in the proposal, the data and evidence
published in the Bureau's General QM Final Rule inform this analysis.
Also as indicated in the proposal, the Bureau conducted an assessment
of the ATR/QM Rule and published its ATR/QM Rule Assessment Report as
required under section 1022(d) of the Dodd-Frank Act.\72\ The
Assessment Report provides quantitative and qualitative information on
questions relevant to the final rule, including the effect of QM status
relative to non-QM status on access to credit. Consultations with other
regulatory agencies, industry, and research organizations inform the
Bureau's impact analyses.
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\71\ HMDA requires many financial institutions to maintain,
report, and publicly disclose loan-level information about
mortgages. These data help show whether creditors are serving the
housing needs of their communities; they give public officials
information that helps them make decisions and policies; and they
shed light on lending patterns that could be discriminatory. HMDA
was originally enacted by Congress in 1975 and is implemented by
Regulation C. See Bureau of Consumer Fin. Prot., Mortgage Data
(HMDA), https://www.consumerfinance.gov/data-research/hmda/.
\72\ Bureau of Consumer Fin. Prot., Ability to Repay and
Qualified Mortgage Assessment Report (Jan. 2019), https://files.consumerfinance.gov/f/documents/cfpb_ability-to-repay-qualified-mortgage_assessment-report.pdf.
---------------------------------------------------------------------------
The data the Bureau relied upon provide detailed information on the
number, characteristics, pricing, and performance of mortgage loans
originated in recent years. While these data allow the Bureau to
estimate the number of mortgage loans historically that would have
satisfied the different QM definitions applicable under the baseline or
the final rule, the Bureau cannot estimate with precision how consumers
may respond to changes in the QM definitions by obtaining alternative
loan products or how creditors may respond by changing loan pricing or
product offerings.
The Bureau received several comments on the proposal's impact
analysis. Two industry commenters stated that the Bureau provided
insufficient explanation or support for its estimate that 33,000
additional consumers would obtain high-priced conventional QM loans due
to the rule. As stated in the proposal's impact analysis, the Bureau
relied on HMDA data and the evidence published in the Bureau's General
QM Final Rule for its analysis. The Benefits to Consumers section of
the proposal stated that between July 1, 2021 and October 1, 2022,
approximately 33,000 additional consumers would obtain conventional QM
loans priced 2.25 percentage points or higher above APOR under the
final rule due to the availability of the original, DTI-based General
QM loan definition and the Temporary GSE QM loan definition.
In addition, an industry commenter stated that the Bureau's 1022(b)
analysis did not account for the effect of the GSE PSPAs when
estimating the impacts of the rule. The proposal's impact analysis
included a footnote estimating that if the GSEs do not purchase loans
above the General QM Final Rule's pricing thresholds during the
duration of the mandatory compliance date delay, approximately 28,000
additional consumers would obtain conventional QM loans priced 2.25
percentage points or higher above APOR under the proposal.\73\ This
estimate reflects possible impacts of the rule if the GSE PSPAs prevent
the GSEs from purchasing loans above the pricing thresholds established
in the General QM Final Rule.
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\73\ 86 FR 12839, 12855 n.98 (Mar. 5, 2021).
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Regarding potential compliance costs, as noted above, a trade
association commented that delaying the mandatory compliance date would
disrupt market
[[Page 22857]]
participants' efforts to bring their systems into compliance with the
General QM Final Rule and cause market participants to incur additional
compliance-related costs. However, as noted above, with or without this
final rule, creditors that wish to originate General QM loans must
implement the revised, price-based General QM loan definition before
October 1, 2022 and thus face the same compliance requirements. The
final rule benefits creditors by providing additional time to implement
these requirements.
As discussed above, many industry commenters stated that
uncertainty about potential reconsideration of the revised, price-based
General QM loan definition will deter creditors from implementing the
revised General QM loan definition (and therefore mitigate benefits
from that final rule). However, commenters did not identify examples of
this occurring in the market, which tends to reduce the credibility of
this concern. Moreover, as discussed above, the Bureau understands that
several larger creditors have already implemented the revised, priced-
based General QM loan definition and announced new products that are
underwritten in accordance with the revised definition.\74\ And as
already noted, the Bureau does not believe this final rule delaying the
mandatory compliance date will meaningfully increase uncertainty in the
market. Even if uncertainty results in some creditors choosing to delay
implementation of the revised, price-based General QM loan definition,
and even if that result could be attributed to the rule, the Bureau is
not aware of any reason to believe that the effect would be large
enough to result in significant limitations on access to responsible,
affordable mortgage credit.
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\74\ The Bureau does recognize that some creditors have
experienced implementation challenges, as discussed above, from
resource constraints due to the recent forebearance plan and
foreclosure moratoria extensions and the need to find sustainable
post-forebearance alternatives to keep consumers in their homes.
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Finally, several industry, trade association, and consumer group
commenters requested that the Bureau expand public access to the
National Mortgage Database for market monitoring and research purposes.
The Bureau acknowledges these comments but considers them to be outside
the scope of this final rule.
C. Description of the Baseline
The Bureau considers the benefits, costs, and impacts of the final
rule against the baseline in which the Bureau takes no action and
compliance with the revised General QM loan definition becomes
mandatory on July 1, 2021, when the Temporary GSE QM loan definition
and the original, DTI-based General QM loan definition expire and can
no longer be used by creditors to obtain QM status on new mortgage
loans. Under the final rule, the Temporary GSE QM loan definition and
the original, DTI-based General QM loan definition can continue to be
used until October 1, 2022, the new mandatory compliance date of the
revised General QM loan definition. As a result, the final rule's
direct market impacts will occur only during the period between July 1,
2021 and October 1, 2022. The impact analyses assume the GSEs will
remain in conservatorship for the duration of this period, and,
therefore, that the conservatorship condition in the Temporary GSE QM
loan definition will not trigger its expiration.
Under the baseline, when the Temporary GSE QM loan definition and
the original, DTI-based General QM loan definition expire on July 1,
2021, conventional loans could only receive QM status under the
Bureau's rules by underwriting according to the revised General QM
requirements, Small Creditor QM requirements, Balloon Payment QM
requirements, the expanded portfolio QM amendments created by the 2018
Economic Growth, Regulatory Relief, and Consumer Protection Act,\75\ or
the Seasoned QM definition.\76\ The revised General QM loan definition,
which will be the only type of QM available at origination to all
creditors following the mandatory compliance date, generally requires
loans to be priced less than 2.25 percentage points above APOR.\77\
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\75\ Public Law 115-174, 132 Stat. 1296 (2018).
\76\ Other than the mandatory compliance date delay implemented
by this final rule, the Bureau's analysis assumes an otherwise
identical market and policy environment under both the baseline and
the final rule. As such, estimates under both the baseline and final
rule assume the same effects of any separate policy proposals,
including the Bureau's pending proposal to amend certain provisions
of Regulation X to assist borrowers affected by the COVID-19
pandemic, which was published in the Federal Register on April 9,
2021. The Bureau notes in this respect that it expects any
interactions of the pending proposal and this final rule to be both
difficult to quantify and very limited relative to the direct
effects of this final rule.
\77\ The comparable thresholds are 6.5 percentage points over
APOR for loans priced under $66,156, 3.5 percentage points over APOR
for loans priced under $110,260 but at or above $66,156, and 6.5
percentage points over APOR for loans for manufactured housing
priced under $110,260. 12 CFR 1026.43(e)(2)(vi)(A) through (D).
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The Bureau anticipates that when the mandatory compliance date is
reached, the main loans affected will be those priced 2.25 percentage
points or higher above APOR that are either conventional loans with DTI
ratios at or below 43 percent (Under-43-Percent-DTI conventional loans)
or GSE-eligible loans. Retaining the July 1, 2021 mandatory compliance
date would have affected these loans because they are currently
originated as QM loans due to either the original, DTI-based General QM
loan definition or the Temporary GSE QM loan definition but, absent
changes in pricing, could not be originated as QM loans and may not be
originated at all after the mandatory compliance date.
The Bureau's analysis of the market under the baseline focuses on
loans priced 2.25 percentage points or higher above APOR that are
either Under-43-Percent-DTI conventional loans or GSE-eligible loans
because the Bureau estimates most loans newly obtaining QM status due
to the final rule fall within those categories. A smaller number of
GSE-eligible loans will not fall within the revised General QM loan
definition because they do not satisfy the consider and verify
requirements in the revised General QM loan definition. The Bureau
lacks the loan-level documentation and underwriting data necessary to
estimate with precision the number of GSE-eligible loans that do not
satisfy the consider and verify requirements in the revised General QM
loan definition. These loans are largely restricted to certain
streamlined refinance loans offered by the GSEs, and the Bureau
estimates that in the current market such loans are considerably less
numerous than Under-43-Percent-DTI conventional loans and GSE-eligible
loans priced 2.25 percentage points or higher above APOR.\78\ However,
demand for such loans could increase if housing market conditions
deteriorate.
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\78\ As of Q4 2020, only 140 loans had been originated through
the GSEs' High-LTV Refinance Option since the inception of the
program. See FHFA Foreclosure Prevention and Refinance Report (Q4
2020), https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/4Q2020FPR.pdf.
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D. Benefits and Costs to Covered Persons and Consumers
1. Benefits to Consumers
The primary benefit to consumers of the final rule is the
availability of conventional QM loans priced 2.25 percentage points or
higher above APOR--including both Under-43-Percent-DTI conventional
loans and GSE-eligible loans--during the period from July 1, 2021 to
October 1, 2022. The Bureau uses HMDA data to estimate the number of
loans that would not have been QM under the baseline, but would have
been QM under the final rule due to their eligibility for either the
original,
[[Page 22858]]
DTI-based General QM loan definition or the Temporary GSE QM loan
definition.\79\ Relative to the baseline, the Bureau estimates that
between July 1, 2021 and October 1, 2022, approximately 33,000
additional consumers will obtain conventional QM loans priced 2.25
percentage points or higher above APOR under the final rule due to the
availability of the original, DTI-based General QM loan definition and
the Temporary GSE QM loan definition.\80\ While many of these consumers
may have obtained mortgages of some kind under the baseline, the
largest benefits to consumers accrue to the consumers who will obtain a
conventional QM loan under the final rule but would not have obtained a
mortgage under the baseline.
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\79\ Specifically, among HMDA loans originated in 2018, the
Bureau estimates that approximately 2,200 loans per month would have
been QM under the original, DTI-based General QM loan definition or
the Temporary GSE QM loan definition due to DTI ratios at or below
43 percent or purchase by a GSE, but would not have been QM under
the revised, price-based General QM loan definition due to rate
spreads over APOR exceeding the applicable price thresholds.
Multiplying this estimate by the 15-month length of the mandatory
compliance date delay yields the Bureau's total estimate of 33,000.
\80\ This estimate assumes that the GSEs continue to originate
loans priced 2.25 percentage points or higher above APOR between
July 1, 2021 and October 1, 2022. If the GSEs do not originate loans
above the General QM Final Rule's pricing thresholds during this
period, the Bureau estimates that approximately 28,000 additional
consumers would obtain conventional QM loans priced 2.25 percentage
points or higher above APOR under the proposal. This estimate
reflects possible impacts of the rule if the GSE PSPAs prevent the
GSEs from purchasing loans above the pricing thresholds established
in the General QM Final Rule.
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Under the baseline, some of these 33,000 consumers may have been
able to obtain General QM loans priced below 2.25 percentage points
over APOR due to creditor responses to the revised General QM loan
definition or obtained QM loans under the Small Creditor QM definition.
Others may instead have obtained FHA loans, likely paying higher total
loan costs as discussed in the General QM Final Rule. Finally, a
portion of these consumers may have obtained non-QM loans under the
baseline, but the Bureau expects some consumers may not have been able
to obtain a mortgage at all.
2. Benefits to Covered Persons
The final rule's primary benefit to covered persons, specifically
mortgage creditors, is the continued profits from originating QM loans
priced 2.25 percentage points or higher above APOR, particularly Under-
43-Percent-DTI conventional loans and GSE-eligible loans. For the
estimated 33,000 additional conventional QM loans priced 2.25
percentage points or higher above APOR under the final rule, the Bureau
estimates an average loan size of $190,000 and thus a total loan volume
of $6.3 billion. Under the baseline, after July 1, 2021, creditors
would have been unable to originate such loans under the original, DTI-
based General QM loan definition or the Temporary GSE QM loan
definition and would instead have had to originate such loans as FHA,
Small Creditor QM, or non-QM loans, or originate at a price at or below
2.25 percentage points over APOR as General QM loans. Creditors'
current preference for originating QM loans priced 2.25 percentage
points or more over APOR likely reflects advantages in a combination of
costs or guarantee fees (particularly relative to FHA loans), liquidity
(particularly relative to Small Creditor QM), or litigation and credit
risk (particularly relative to non-QM). Moreover, QM loans are exempt
from the Dodd-Frank Act risk retention requirement whereby creditors
that securitize mortgage loans are required to retain at least 5
percent of the credit risk of the security, which adds significant
cost. As a result, the final rule conveys benefits to mortgage
creditors originating General QM and Temporary GSE QM loans on each of
these dimensions.
Given creditors' preference for originating QM loans, the final
rule may allow lenders to avoid price reductions on some loans that
would have been necessary to satisfy the revised General QM loan
definition under the baseline. This will increase revenue for creditors
on such loans originated during the July 1, 2021 to October 1, 2022
period.
3. Costs to Consumers
For the duration of the July 1, 2021 to October 1, 2022 period,
creditors that would have reduced prices on some loans to satisfy the
revised General QM loan definition under the baseline may delay
reducing loan prices under the final rule. This is likely to occur for
some uncertain fraction of the estimated 33,000 additional conventional
loans within the original, DTI-based General QM loan definition and the
Temporary GSE QM loan definition. Consumers obtaining such loans will
pay higher prices for these conventional QM loans relative to the
baseline.
In addition, consumers who would have obtained non-QM loans under
the baseline but instead obtain QM loans under the final rule forgo the
benefit of retaining the ATR causes of action and defenses against
foreclosure.
4. Costs to Covered Persons
The final rule will involve minimal costs to covered persons. The
most sizable potential costs to covered persons are effectively
transfers between creditors for the duration of the mandatory
compliance date delay, reflecting temporarily reduced loan origination
volume for creditors that primarily originate FHA or Under-43-Percent-
DTI non-QM loans and temporarily increased origination volume for
lenders who primarily originate Under-43-Percent-DTI conventional loans
priced 2.25 percentage points or more over APOR.
5. Other Benefits and Costs
In delaying the expiration of the original, DTI-based General QM
loan definition and the Temporary GSE QM loan definition, the final
rule will delay any effects of the expiration on the development of the
secondary market for private (non-GSE) mortgage loan securities. When
the Temporary GSE QM loan definition expires, those loans that do not
fit within the revised General QM loan definition represent a potential
new market for private securitizations. Thus, the final rule will
slightly reduce the scope of the potential non-QM market for the
duration of the mandatory compliance date delay, likely lowering
profits and revenues for participants in the private secondary market.
This will effectively be a transfer from these private secondary market
participants to participants in the agency secondary market.
E. Specific Impacts of the Final Rule
1. Impact on Depository Institutions and Credit Unions With $10 Billion
or Less in Total Assets, as Described in Section 1026
The final rule's expected impact on depository institutions and
credit unions that are also creditors making covered loans (depository
creditors) with $10 billion or less in total assets is similar to the
expected impact on larger creditors and non-depository creditors. Those
smaller creditors originating portfolio loans can originate Small
Creditor QM loans priced 2.25 percentage points or higher above APOR,
and thus may rely less on the original, DTI-based General QM loan
definition and the Temporary GSE QM loan definition for originating
such loans. If the General QM Final Rule's mandatory compliance date
will confer a competitive advantage to these small creditors in their
origination of loans priced 2.25 percentage points or higher
[[Page 22859]]
above APOR, the final rule will delay this outcome.
2. Impact of the Proposed Provisions on Consumers in Rural Areas
The final rule's expected impact on consumers in rural areas is
similar or slightly larger than the expected impact on non-rural areas.
Based on 2018 HMDA data, the Bureau estimates that loans priced 2.25
percentage points or higher above APOR that are either Under-43-
Percent-DTI conventional loans or GSE-eligible loans reflect a slightly
larger share of the conventional loan market in rural areas (0.8
percent) relative to non-rural areas (0.6 percent).\81\
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\81\ These statistics are estimated based on originations from
the first nine months of the year, to allow time for loans to be
sold before HMDA reporting deadlines.
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VI. Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA),\82\ as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996,\83\ requires each
agency to consider the potential impact of its regulations on small
entities, including small businesses, small governmental units, and
small not-for-profit organizations. The RFA defines a ``small
business'' as a business that meets the size standard developed by the
Small Business Administration pursuant to the Small Business Act.\84\
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\82\ 5 U.S.C. 601 et seq.
\83\ Public Law 104-121, tit. II, 110 Stat. 857 (1996).
\84\ 5 U.S.C. 601(3) (the Bureau may establish an alternative
definition after consultation with the Small Business Administration
and an opportunity for public comment).
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The RFA generally requires an agency to conduct an initial
regulatory flexibility analysis (IRFA) and a final regulatory
flexibility analysis (FRFA) of any rule subject to notice-and-comment
rulemaking requirements, unless the agency certifies that the rule
would not have a significant economic impact on a substantial number of
small entities.\85\ The Bureau also is subject to certain additional
procedures under the RFA involving the convening of a panel to consult
with small business representatives prior to proposing a rule for which
an IRFA is required.\86\
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\85\ 5 U.S.C. 603 through 605.
\86\ 5 U.S.C. 609.
---------------------------------------------------------------------------
In the proposal, the Bureau certified that an IRFA was not required
because the proposal, if adopted, would not have a significant economic
impact on a substantial number of small entities. The Bureau did not
receive comments on its analysis of the impact of the proposal on small
entities. The Bureau does not expect the final rule to impose costs on
small entities relative to the baseline. Under the baseline, on July 1,
2021, the Temporary GSE QM loan definition and the original, DTI-based
General QM loan definition expire, and therefore no creditor--including
small entities--would have been able to originate QM loans under either
definition after that date. Under the final rule, small entities that
would otherwise not have been able to originate QM loans under these
definitions will be able to originate such loans with QM status until
October 1, 2022. Thus, the Bureau anticipates that the final rule will
only reduce burden on small entities relative to the baseline.
Accordingly, the Acting Director certifies that this final rule
will not have a significant economic impact on a substantial number of
small entities.
VII. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA),\87\ Federal
agencies are generally required to seek, prior to implementation,
approval from the Office of Management and Budget (OMB) for information
collection requirements. Under the PRA, the Bureau may not conduct or
sponsor, and, notwithstanding any other provision of law, a person is
not required to respond to, an information collection unless the
information collection displays a valid control number assigned by OMB.
---------------------------------------------------------------------------
\87\ 44 U.S.C. 3501 et seq.
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The final rule will amend 12 CFR part 1026 (Regulation Z), which
implements TILA. OMB control number 3170-0015 is the Bureau's OMB
control number for Regulation Z. The Bureau has determined that this
final rule does not contain any new or substantively revised
information collection requirements other than those previously
approved by OMB under that OMB control number 3170-0015.
VIII. Congressional Review Act
Pursuant to the Congressional Review Act,\88\ the Bureau will
submit a report containing this rule and other required information to
the U.S. Senate, the U.S. House of Representatives, and the Comptroller
General of the United States at least 60 days prior to the rule's
published effective date. The Office of Information and Regulatory
Affairs has designated this rule as a ``major rule'' as defined by 5
U.S.C. 804(2).
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\88\ 5 U.S.C. 801 et seq.
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IX. Signing Authority
The Acting Director of the Bureau, David Uejio, having reviewed and
approved this document, is delegating the authority to electronically
sign this document to Laura Galban, a Bureau Federal Register Liaison,
for purposes of publication in the Federal Register.
List of Subjects in 12 CFR Part 1026
Advertising, Banks, banking, Consumer protection, Credit, Credit
unions, Mortgages, National banks, Reporting and recordkeeping
requirements, Savings associations, Truth-in-lending.
Authority and Issuance
For the reasons set forth in the preamble, the Bureau amends
Regulation Z, 12 CFR part 1026, as set forth below:
PART 1026--TRUTH IN LENDING (REGULATION Z)
0
1. The authority citation for part 1026 continues to read as follows:
Authority: 12 U.S.C. 2601, 2603-2605, 2607, 2609, 2617, 3353,
5511, 5512, 5532, 5581; 15 U.S.C. 1601 et seq.
0
2. In supplement I to part 1026:
0
a. Under Section 1026.43--Minimum Standards for Transactions Secured by
a Dwelling, revise introductory paragraph 2;
0
b. Under section 43(e)(2) Qualified mortgage defined--general, add
paragraph 1; and
0
c. Revise section 43(e)(4) Qualified mortgage defined--other agencies.
The revisions and addition read as follows:
Supplement I to Part 1026--Official Interpretations
* * * * *
Section 1026.43--Minimum Standards for Transactions Secured by a
Dwelling
* * * * *
2. General QM Amendments Effective on March 1, 2021. The
Bureau's revisions to Regulation Z contained in Qualified Mortgage
Definition Under the Truth in Lending Act (Regulation Z): General QM
Loan Definition published on December 29, 2020 (2021 General QM
Amendments) apply with respect to transactions for which a creditor
received an application on or after March 1, 2021 (effective date).
Compliance with the 2021 General QM Amendments is mandatory with
respect to transactions for which a creditor received an application
on or after October 1, 2022 (mandatory compliance date). For a given
transaction for which a creditor received an application on or after
March 1, 2021 but prior to October 1, 2022, a person has the option
of complying either: With 12 CFR part 1026 as it is in effect; or
with 12 CFR part 1026 as it was in effect on February 26, 2021,
together with any amendments to 12 CFR part 1026 that become
effective after February 26, 2021, other than the 2021 General QM
Amendments. For transactions subject to
[[Page 22860]]
Sec. 1026.19(e), (f), or (g), creditors determine the date the
creditor received the consumer's application, for purposes of this
comment, in accordance with Sec. 1026.2(a)(3)(ii). For transactions
that are not subject to Sec. 1026.19(e), (f), or (g), creditors can
determine the date the creditor received the consumer's application,
for purposes of this comment, in accordance with either Sec.
1026.2(a)(3)(i) or (ii).
* * * * *
43(e)(2) Qualified mortgage defined--general.
1. General QM Amendments Effective on March 1, 2021. Comment 43-
2 provides that, for a transaction for which a creditor received an
application on or after March 1, 2021 but prior to October 1, 2022,
a person has the option of complying either: With 12 CFR part 1026
as it is in effect; or with 12 CFR part 1026 as it was in effect on
February 26, 2021, together with any amendments to 12 CFR part 1026
that become effective after February 26, 2021, other than the
revisions to Regulation Z contained in Qualified Mortgage Definition
Under the Truth in Lending Act (Regulation Z): General QM Loan
Definition published on December 29, 2020 (2021 General QM
Amendments). Prior to the effective date of the 2021 General QM
Amendments, Sec. 1026.43(e)(2) provided a qualified mortgage
definition that, among other things, required that the ratio of the
consumer's total monthly debt to total monthly income at the time of
consummation not exceed 43 percent. The 2021 General QM Amendments
removed that requirement and replaced it with the annual percentage
rate thresholds in Sec. 1026.43(e)(2)(vi), among other revisions.
Both the qualified mortgage definition in Sec. 1026.43(e)(2) that
was in effect prior to the 2021 General QM Amendments and the
qualified mortgage definition in Sec. 1026.43(e)(2) as amended by
the 2021 General QM Amendments are available to creditors for
transactions for which a creditor received an application on or
after March 1, 2021 but prior to October 1, 2022. See comment 43-2
for an explanation of how creditors determine the date the creditor
received the consumer's application for purposes of that comment.
* * * * *
43(e)(4) Qualified mortgage defined--other agencies.
1. General. The Department of Housing and Urban Development,
Department of Veterans Affairs, and the Department of Agriculture
have promulgated definitions for qualified mortgages under mortgage
programs they insure, guarantee, or provide under applicable law.
Cross-references to those definitions are listed in Sec.
1026.43(e)(4) to acknowledge the covered transactions covered by
those definitions are qualified mortgages for purposes of this
section.
2. Mortgages for which the creditor received the consumer's
application prior to October 1, 2022. Covered transactions that met
the requirements of Sec. 1026.43(e)(2)(i) through (iii), were
eligible for purchase or guarantee by the Federal National Mortgage
Association (Fannie Mae) or the Federal Home Loan Mortgage
Corporation (Freddie Mac) (or any limited-life regulatory entity
succeeding the charter of either) operating under the
conservatorship or receivership of the Federal Housing Finance
Agency pursuant to section 1367 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12 U.S.C. 4617), and for
which the creditor received the consumer's application prior to the
mandatory compliance date of October 1, 2022, continue to be
qualified mortgages for the purposes of this section, including
those covered transactions that were consummated on or after October
1, 2022.
3. Mortgages for which the creditor received the consumer's
application on or after March 1, 2021 but prior to October 1, 2022.
For a discussion of the optional early compliance period for the
2021 General QM Amendments, please see comment 43-2.
4. [Reserved].
5. [Reserved].
* * * * *
Dated: April 26, 2021.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2021-09028 Filed 4-29-21; 8:45 am]
BILLING CODE 4810-AM-P