The Consumer Financial Protection issued its
general QM final rule, revising the definition and criteria of a general qualified mortgage. The final rule removes the current requirement that the consumer’s debt-to-income ratio not exceed 43% and replaces it with a limit based on the loan’s pricing. Under the general QM final rule, a loan receives a conclusive presumption that the consumer had the ability to repay if the loan’s APR does not exceed the average prime offer rate for a comparable transaction by 1.5% or more as of the date the interest rate is set. A loan receives a rebuttable presumption that the consumer had the ability to repay if the loan’s APR exceeds the APOR for a comparable transaction by 1.5% or more but by less than 2.25%. The final rule provides higher pricing thresholds for loans with smaller loan amounts, for certain manufactured housing loans, and for subordinate-lien transactions.
The final rule retains the General QM loan definition’s existing product features (i.e. no balloon or interest-only payment features) underwriting requirements, and limits on points and fees. While the rule removes the requirement to use Appendix Q, measures to calculate income and debit, it does require creditors to consider a consumer’s DTI ratio or residual income, verified income or assets other than the value of the dwelling, and verified debts in making its repayment determination and provides compliance safe harbors methods for doing so. The final general QM rule becomes effective July 1, 2021, at which time the GSE QM provisions will expire (unless the GSEs exit conservatorship prior to July 1).
